Camil Alimentos SA
BOVESPA:CAML3
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Camil Alimentos SA
Earnings Call Analysis
Summary
Q2-2025
Camil Alimentos reported a record net revenue of BRL 3.2 billion for Q2 2024, a 12% year-on-year increase. EBITDA reached BRL 288 million, soaring 35%, reflecting a margin rise to 8.8%. Volume growth of 14% sequentially was driven primarily by grains, offset by a 6% year-on-year decline in sugar exports. The company is optimistic about future profitability, emphasizing the successful launch of its pasta line, which has surpassed initial expectations. However, the outlook for the rice segment remains cautious due to potential climatic impacts. Camil also aims for continuous improvement in operational efficiencies as it expands its presence in Paraguay's rice market.
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Good morning. Welcome to Camil Alimentos video conference call to discuss the results of the second quarter 2024. Joining us today are Mr. Luciano Quartiero, CEO; Flavio Vargas, CFO and IRO; and the company's Investor Relations team. We would like to inform you that this event is being recorded. [Operator Instructions]
We would like to emphasize that any forward-looking statement that might be made during this video conference call related to Camil's business outlook, projections and financial and operating goals are beliefs and assumptions from the company's management as well as information currently available. These may involve risks, uncertainties and assumptions as they refer to future events and therefore, depend on circumstances that may or may not materialize. Investors must understand that such general economic industry conditions and other operating factors may lead to results that differ substantially from those expressed in such forward-looking statements.
We will start the presentation with Mr. Quartiero followed by Flavio's presentation. At the end, we'll open for a Q&A session after 15 minutes. Please go ahead, Mr. Quartiero.
Hello, welcome to the comments on the results for the second quarter ended August 2024. On Slide 2, we highlight the categories of operation and the main indicators for the quarter. We generated record net revenue of BRL 3.2 billion in the period, up by approximately 12% year-on-year and 13% sequentially. EBITDA was BRL 288 million, up 35% compared to EBITDA in Q2 2023, with a margin of 8.8%. This margin is a 1.5 percentage points higher compared to the same period last year.
It is worth noting that in the last 12 months, Camil's EBITDA exceeded BRL 1 billion for the first time, reiterating not only our efforts to grow the company over the 60-plus years of its existence, but our positioning as one of the largest food brand platforms in South America. In volumes, we grew by 14% in the sequential results, driven mainly by higher volumes of grains. In the year-on-year comparison, however, we saw a drop of approximately 6%, mainly explained by lower sugar export volumes compared to Q2 2023.
We'll go into more detail on the next slides. Moving on to Slide 3. As for Brazil's operating highlights, we start with the high turnover segment, made up of grains and sugar in the sequential comparison. Growth in the category was driven by higher volumes of grains with larger purchases by retailers in the period. This result was driven by the mismatch of the rice harvest this year, shifting a greater seasonality usually concentrated in the first quarter of 2024 to the second quarter of this year.
In addition, the company spared no effort to be able to move production and serve our customers during the period of peak demand during the tragedy in Rio Grande do Sul this year, with deliveries concentrated in May and June 2024. It is worth noting that Camil has been recognized as a highly renowned brand by the Brazilian Patent and Trademark Office, INPI. Once again, reinforcing our reputation for building prestigious and highly recognized brands.
In sugar, we still face a challenging scenario from a profitability point of view. We achieved higher domestic sales volumes in the retail environment, but this effect was offset by higher sugar exports compared to Q2 2023. In the high-value segment, year-on-year growth in volume was over 8%, driven by fish, pasta and coffee. Sequentially, we saw a drop of minus 1.5%, due to the lower seasonality of fish sales in the period, partially offset by the growth in coffee volumes.
Moving on to each business line. We highlight the launch of the Camil pasta line in Sao Paulo, reinforcing the strength of the Camil brand and the high quality of our products already recognized by the market. We continue to show good profitability in the pasta category, and we remain confident of its growth through the launch of Camil. As for coffee, we recorded continued sales growth in the category both in the sequential and annual comparison, pursuant to the strategy to grow sales of the União brand. The launch of new packaging and União Gourmet coffees also marked the expansion of our coffee portfolio in the period, increasing the added value of the category and further boosting our União brand.
In the cookies category, we posted sequential growth in volumes, and we are moving on with our plan to improve profitability and sales. In the fish category, we recorded year-on-year growth, but with a sequential reduction due to the seasonality of the category in the first quarter of the year, which had a sequential impact on high-value results.
Moving on to the International segment. In the sequential comparison, we had higher sales volumes in Uruguay, which boosted the category's growth on a consolidated basis. In the annual comparison, we saw a decline due to the strong comparative base in Q2 '23, a period in which we had a high volume of sales in the country. It's important to highlight the good news about the International segment. We announced the first step in our intention to enter the Paraguay and rice market.
In September 2024, we signed an MOU, a memorandum of understanding for the acquisition of the shares of the capital stock of Villa Oliva. The transaction will drive diversification and improve competitiveness of product origination for Camil. The structure of the transaction aims to meet Camil's interest in managing only the industrial operations and assets related to production, industrialization, processing and sale of rice without contemplating the ownership of real estate in rural areas.
Therefore, we still have some conditions precedent and discussions about the structure of the operation, and we will keep the market informed about the next steps in the transaction. We are gradually working on gaining scale and profitability and maximizing the results of the new categories. We remain confident that we are on the right track to achieve our growth and profitability objectives. I'll hand it over to Flavio to comment on the financial results for the period. Please go ahead, Flavio.
Hello, everyone. Moving on to the financial highlights of the period. As Luciano mentioned, we achieved a record net revenue of BRL 3.2 billion, an increase of approximately 12%. Cost of goods sold grew by 10%, mainly driven by the increase in high turnover and the high value of fish and coffee. As a result, our gross profit hit a record high of BRL 698 million, with a margin of 21% in the quarter. SG&A by net revenue for the period was stable with a 6% increase in nominal SG&A in Brazil due to the increase in volumes with an increase in freight, marketing expenses and G&A and personnel expenses. International SG&A grew by 22%, mainly due to the increase in Uruguay and Chile. It's worth noting that the company continues to carry out its projects to optimize and review expenses, which has yielded good results within our scope of general and administrative expenses. We were able to maximize the synergies and profitability of the 2021 acquisition so far, exceeding our targets and reiterating confidence in the growth of new businesses.
In other operating income and expenses, we totaled BRL 2.8 million in the quarter, mainly due to revenues from rentals and provisions for losses on prepayments that were reversed, mainly as a result of amounts payable by suppliers. In terms of EBITDA, we reached BRL 288 million, an increase of 35% compared to EBITDA in Q2 2023 and a margin of 8.8%, up by 1.5 percentage points year-on-year. As mentioned by Luciano, it is worth noting that in the last 12 months, Camil's EBITDA exceeded BRL 1 billion for the first time, reinforcing our growth through acquisitions and organic growth in recent years.
On Slide 7, sequentially, we highlight the 12% increase in net revenue and 13% growth in our EBITDA. Moving on to debt position. The company's net debt reached BRL 3.6 billion, with net debt to EBITDA for the last 12 months of 3.5x in the quarter. It is important to emphasize that our covenants reading is always annual. The next one will be in February 2025.
We always have a relevant seasonality of working capital over the quarters, more specifically in rice. Therefore, the first quarters of the year usually show greater cash consumption, while the fourth quarter usually presents a release in working capital and consequently promotes an improvement in leverage. With regard to new funding, we highlight the conclusion of the 14th issue of debentures backed by CRA in June 2024. The issue consists of simple debentures in 3 series totaling BRL 650 million.
CapEx for the quarter totaled BRL 66 million, with investments in pasta and coffee. As for ESG, we are consistently pursuing the actions carried out by the company, and our most recent highlights are our entry into the ISE at B3 and our direct support with basic food staples sent to Rio Grande do Sul. We remained strong in our social pillar with one of the highlights of this quarter being the continuity of the Grãos da Base Camil Business School.
Additionally, in September, we published our Brazilian Governance Code report. We had 92% adherence to it, further strengthening our governance. I'd like to invite everyone to access our sustainability report and governance report for more information, both available at the CVM and on our IR website.
To conclude, as Luciano has already pointed out, we are working hard to boost our efficiency and gradually grow in scale and profitability. We are confident that we are on the right track to take the company to a new level of scale and profitability. We'll be available for Q&A if you have any questions. Thank you all.
[Operator Instructions] The first question is from Tiago Harduim from Citi.
Congrats on the results. I'd like to touch on a couple of points. First, I'd like to hear about the rice segment, please. How do you see things happening in the second half, and the crops in Brazil and Uruguay. And the second question is about the launch of pasta. The Camil pasta is being awaited by the market. So I'd like to hear about how it's performing at the beginning.
Thank you for your questions. I think generally speaking, the scenario in the second half of the year will be very challenging. There are many consumption topics being discussed. And I think it does Create more challenges. So for rice, when we look at the prospects for the next crop, which is your question. So I'll combine both questions in one. According to the last Conab survey, prospects are that the planted area in Rio Grande do Sul will increase by 5%, and there may be an improvement in yield.
If that happens, it could mean the crop will be 5% to 10% bigger than that of last year, thinking that the crop last year was slightly higher than the previous year, which was quite bad. And we've had year-end inventories for 2 years that have been quite low. So this will be the largest production considering this low year-end inventory. It's not a sign that it should have a huge impact on price because we will have to replenish those inventories. So this crop is being planted right now.
Some areas in Rio Grande do Sul are in line with the pace for planting and some regions of the state are slightly delayed because of the climate. So it's too soon to understand what kind of an impact that may have on the production. But it is a fact that a significant part of it will be delayed. That does not apply to Uruguay. Things are on track in Uruguay and planting pace is on track.
Now, moving on to rice. Last quarter, as I said during our last conference call, things were unusual. There was a carryover stock from the -- that quarter to the next. And usually, the third and fourth quarters are weaker, especially the fourth quarter. So the company has been working hard to have good quarters. But I'd just like to remind you of this historical fact. So that's about rice.
As for Camil pasta, we had the launch at the end of May, and we have been able to have a good acceptance by clients. We've been placing it quite well. Clients have been very positive about it and so have end consumers. It's been a surprise the speed with which we have been able to place the product and to turn it over. So, so far, it has surpassed my expectations. The company is very optimistic about that launch, Tiago.
The next question is from Gustavo Troyano from Itau BBA.
I'd like to take the opportunity that we're talking about the M&A after the M&A in Paraguay. I'd like to talk about the deal. Obviously, Paraguay is mainly an exporter. It exports rice to Brazil. Could you talk about that rationale? And as a segue to this more exporting mix, could you share with us what the synergies or the impact that you expect from this connection from Paraguay's exports to Brazil. So we can understand what the implications of that are to the Brazilian market.
My second question is about retailers in rice. Luciano, you've already mentioned some of the prospects. But if we could hear a few more details and focus more on how you see that inventory dynamics at retailers, do they have high levels of inventory? What kind of volumes can we expect, especially based on this discussion about inventory levels at retailers for rice. Those are my 2 questions.
Thanks for your questions. On Paraguay, well, this is a different kind of acquisition, slightly out of the box. I will tell you about the rationale about why and how we did it. To your first point, Paraguay, has great cost competitiveness because the cost of rice production in Paraguay is lower than that of other countries. So it's a natural supplier to Brazil, as you said. It also exports to Chile, where we have operations with Tucapel. And it's also an opportunity to supply to Peru. If for any reason, be it exchange rate or price difference, Paraguay is unable to supply to those countries. It sells to other countries and those are our operations through SAMAN.
So in terms of synergies with our operations and a new source of supply, synergies are huge across the board. The difference in that operation is that the company has been looking into Paraguay for many years, and the challenge of going into Paraguay was that production and the industry of vertical. So rice growers have an industry and they used to operate or trade especially for exports. It is not Camil's objective to own any land. We don't work with any of the primary parts of the categories where we operate.
So we could never find a way to go into Paraguay without having to own land because of the local model in Paraguay. Starting a few years ago, we ran a test in Uruguay, where SAMAN leased land from a major land owner and sublease that to smaller growers who grow rice. So SAMAN through that lease and sublease process doesn't make any money, but it can guarantee rice supply and provide support and funding to those smaller growers.
So based on our idea, we were able to go into Paraguay through a different model. So controllers are acquiring the Paraguay operation. That deal should go through in 45 days or 60 days. controlling shareholders will separate the operation. So land will go to one company and the industry and operational licenses to a different one. And that one will be so to Camil.
So that reorganization process to turn that over to Camil should happen at the first quarter next year. The second element concerning, land in addition to this creative solution based on the Uruguay model is that there was a second limiting factor. These lands are on the border in Paraguay. And Paraguay in legislation requires that land owners, the individuals either have a residence there or if it's a legal entity, they have to have a special permit.
So the fact that controlling shareholders will keep the land will meet Paraguayan legislation. So based on that model, replicating the Uruguay model there, Camil can ensure rice supply. Let me just take a step back. During the years, we were looking to go into Paraguay, Camil looked into building a rice industry, but that would not guarantee rice supply because they have a vertical production model. So by separating those two operations, by leasing and subleasing the land to growers, again, based on the Uruguay model. By doing that, we can ensure rice supply and origination for Camil Paraguay. That acquisition accounts for roughly Camil will own about 10% of the Paraguay production to sell.
And the potential for growth is huge because there are areas close to our future industry that can yet be developed. So the potential for growth is huge in Paraguay. So, the company is very optimistic because after years of looking into it, we've found a way to do it, and I think that will make us very competitive in the rice business in many countries.
About the retailers rice inventory, we don't see any change in the inventory profile. I think a concern in retail and the industrial sector is still working capital. Because of the cost of money, everybody is paying attention to that carefully. So retailers, just like us in the industry are keeping an eye out for that.
But there have been no structural changes on their inventory levels, at least not in our opinion. I don't know if there's anything else you'd like to talk about more specifically.
The next question is from Pedro Fonseca from XP.
Congratulations on the quarter. I'd like to touch on a couple of points, please. First is about cookies. The company mentioned that the plan to improve profitability is on track. My question is, what's missing for the company to reach its margin targets. And if you could give us some color on at what level of margin, the cookie operation is running at. That would be great. Also, the sequential increase in price in the high-value categories, which I think was 7% sequentially, also caught my attention. Could you give us some granularity across the categories? You mentioned the União coffee. Is there an element of seasonality and mix that may have had an impact? Those are my questions.
Thanks for your questions. With regards to cookies, when the company acquired the operation, it was in deficit. We managed to bring that to zero in a short period of time. We did it gradually, and we have been improving results ever since. We don't provide a margin guidance, but let me try and point to you where we stand. We are at 65% to 70% of where we would like to be in terms of results. Growth in volumes has been taking place quarter-on-quarter. As I mentioned in our last call, we still have considerable idle capacity.
So the company has been executing on the right price and higher margins will come from the industrial cost and a higher sales volume. We're focusing on the commercial execution of categories, so we can capture those volumes and recover the space that Mabel had in the market, and we're taking steps every month to move in that direction. So that's what I can say about that category without disclosing further details or guidance.
As for the high prices in the high-value segment. There is a mix element good. As you said, coffee prices have gone up in the quarter. Fish prices have also been increasing the quarter. There was a slight increase in pasta and prices have remained somewhat stable in cookies. So again, we are focusing on capturing volumes. And in a way, I think that explains the high prices and the high-value segment.
[Operator Instructions] Our next question is from Laura Hirata from Santander.
I'd like to hear more about the high-value category, please. Could you provide more color on cookies? Are you thinking about optimizing the cookies portfolio? If you think about the current portfolio and the portfolio that came with the acquisition that would be great. And I'd like to hear a bit more about Camil's price index compared to market leaders in the categories as well as how the introduction of the new Camil products has been at the point of sale where you already operated with the other categories.
Thanks for the questions, Laura. In the cookies category, we are concluding our package sizing. Since the acquisition, we've been through a few processes, some of which are quicker when you have to adjust equipments, for instance, that's faster, there are other processes that are slightly slower. Since Camil is a new entrant, we're not reinventing the wheel. We're doing some research and we have been replicating what the market has been doing. That's what we've been focusing on. Those first adjustments.
As for new SKUs in that segment, there are some products in our pipeline, but our focus has really been on winning over more space with the existing products rather than expanding the category. As for the price index of brands and products, that's quite a broad subject. I think it would be difficult to go into further details. But I could give you an example in Camil pasta that's a new brand in the pasta category. Since this is a Camil brand, what we're trying to do is to stay close to the best known brand prices.
So that's how we're going to position ourselves. Mabel's price positioning can be slightly below the average. For some cookies, the prices can be lower, for instance. So it depends on category. It varies from category to category. The only thing, I'd say, is that across the board, across all categories, we always try to operate with brands that have Tier 1 prices. And we also have lower cost, lower quality brands that's Tier 3. So Camil always tries to operate across all categories, across all segments.
We do the same for rice. We do the same for beans. Coffee, also, we have the União brand and we have the Seleto brand. So we try to be present across categories, but we do have some main brands in the premium segment, and that's recognized by consumer and can be reflected in prices at the end of the day.
[Operator Instructions] Since there are no further questions, we will now conclude Camil's Q&A session. Thank you all for joining us and have a great day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]