Fertilizantes Heringer SA
BOVESPA:FHER3
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Fertilizantes Heringer SA
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Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Fertilizantes Heringer's First Quarter 2019 Earnings Conference Call. Today with us, we have Mr. [ Ricardo Garcia ], Head of Finance and Controller; and Alfredo Fardin, Supply and Logistics Director. We'd like to inform you that this event is being recorded. [Operator Instructions] There will be a replay facility for this call for 1 week. This event is being simultaneously webcast through Heringer's IR website at www.heringer.com.br/ir where the slide presentation is available for download.
Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of the company's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of the company and could cause results to differ materially from those expressed in such forward-looking statements.
Now I will turn the conference over to Mr. [ Ricardo Garcia ]. Please go ahead, sir.
Ladies and gentlemen, good morning. Thank you for joining us today for joining our meeting about the earnings of the first quarter 2019 in the current month of May. Our agenda comprises the status of our Judicial Recovery and some financial highlights of the company vis-Ă -vis the first quarter and also our perspectives and outlook for the rest of the year and the near future.
We have already filed for Judicial Recovery on February 4. It was already approved. And on February 20, we had the acceptance of the request. And on April 10, we had the company filing its Judicial Recovery Plan. We also had a meeting with the creditors, and we are just about to have the approval of the plan with our trustees.
Let's move now to the earnings of the first quarter. When compared to the same quarter of the previous year, we had a reduction, a drop of 90% in our volumes. We keep on having our crops active. However, in some of them, there was a significant reduction, particularly sugarcane, 933% (sic) [ 93% ] of reduction in volume; coffee, 83%; corn, 72% (sic) [ 92% ]; and soybean, 80.5% (sic) [ 85.5% ], all together around almost 92% (sic) [ around 90% ] of reduction in volume. The main reason behind this reduction was the difficulty in funding.
During this period and consequently, our supply possibility was also reduced. If you think about special products in our business, we can also see there was a drop, a reduction in the share of special products in Q1 2019. Our expectation is to go back to the same levels we had back in 2018, around 45%.
What about our earnings for the first quarter? Like we said before, we had a reduction in volume, around 90%. We maintained net revenue of BRL 135 million in Q1. And a [ super ] high cost, BRL 156 million; total gross loss right now of BRL 20 million; freight and commission expenses, around BRL 4.5 million; and SG&A expenses, BRL 41 million, totaling an EBITDA of BRL 61 million in the quarter. We also had net financial expense of BRL 22 million, and our net income closed the quarter at BRL 92 million negative. This was very much impaired, like we said before, by the reduction in volumes and also impacted by the cost of inventories this quarter. We also had expenses or SG&A expenses with some nonrecurring expenses. And this is owing to the company's reorganization process. We had high costs related to a reduction in our head count. And we foresee an adjustment for the following quarters of these expenses more directly.
What about distribution and production? In the first quarter, well, we already explained our P&L. And we break down this production, SSP and distribution with the total for the quarter. Basically, this big amount still stems from the distribution of fertilizers.
Sulphuric acid production still has a cost, a slight cost of BRL 3 million this year, already lower than last year, owing to the reduction of the volumes sold. We have an environmental license process in our unit or sulphuric acid production in Paranaguá, and we expect to have it still in the first half of 2019.
What about our cash flow? It is still impaired by our volumes where cash movement proportional to the volume that we delivered. The negative result before income tax was BRL 92 million, as we said before. And we also had some revenues that did not have cash impact around [ BRL 1 million ] and mostly related to hedge operations. We also had a reduction in the purchased assets, BRL 132 million, and also, inventory reduction and some recoverable taxes, which were recovered, and accounts from customers.
On the other hand, we also had a reduction in liability accounts, around BRL 41 million, stemming mostly from a reduction of leasing and also payment and some finance of imports that were pending.
Divestment, around BRL 3 million, which also had an impact on our cash flow. And last but not least, it also brought a negative result in our financing activities, around BRL 0.4 million. So our cash from BRL 20 million closed this quarter at BRL 10 million with a reduction of BRL 9.6 million.
What about the price of raw materials in the international market? These prices are relatively flat. We had a slight reduction, 8% in MAP; and also a reduction of 1% in potassium chloride; and 9% in urea. This drop happened in the first 3 months of the first quarter.
What about our shareholding structure? It remains the same, the same scale. And we had a reduction in our owners, particularly owing to the recovery, the Judicial Recovery. And as a result, we had a drop in our stock price.
What about the outlook or perspectives for production? For grain production, according to CONAB, for crop year '18/'19, it is 235 million tons for this quarter. And we expect to have this growth of 2.4%, which corresponds to 7.7 million tons above the previous crop. Planted area, expected 63 million hectares also posting estimated growth of approximately 2%, when compared to the crop year 2017/'18.
What about our seasonability? It is very similar to the previous one, no significant changes. But we expect to see an increase of 3% when compared to 2018. This is not reflected officially in our numbers, but we believe that 35.5 million from -- of 2018 should be 36.6 million in year 2019. So we expect to maintain the growth rate from 2017 and 2018 to be very similar from 2018 to 2019.
[Operator Instructions] The first question is from [ Jose Gibero ].
I think there was a confusion. I'm [ Jose Elias ]. I'm a majority shareholder of the company for a while now, and I saw the Judicial Recovery Plan and also the explanation of the officers about the net income. A lot was said about the external conditions, but little was said about what's happening in-house. Over the years, many people say that the management was given information about growth, but not so many signs about how to adjust the real to the real condition of the company. So I want to know about the Board, about management, what about the fiscal council? Do you have a plan to have an Audit Committee because that's something that may improve the consistency of information, so that investors and creditors can make better decisions about the company? Would you tell us more about it, please?
Mr. [ Jose Elias ], first of all, thank you for asking your question. The company is being supported by PwC, Price, auditors. It is already happening. And during the Judicial Recovery process, it is still being supported. And we are happy with the support provided by PwC, so we can search for the best alternatives and explanations to the market and our shareholders. As for the Judicial Recovery process, we also hired other consultants specialized in legal aspects and also financial aspects in order to provide support to the company, so we can be successful in the approval of our Judicial Recovery Plan and also the perpetuity of the company. These 2 goals are definitely our top priorities.
[Operator Instructions] There are no further questions. Would like to turn the floor back to Mr. Alfredo Fardin for the closing statements.
Good morning, everyone. The company keeps on trusting on the fundamentals of the Brazilian agribusiness. We consider them to be very sound and solid. Naturally, the company has a big challenge, which is to overcome this moment. The company has been very diligent and making everything possible to have a new model, a leaner company, more dynamic without impairing the focus on the sale of more profitable products. The special product line, like we said before, had a slight drop in Q1, obviously affected by operations in January prior to the Judicial Recovery Plan. And in future quarters, we expect to go back to the historical margins of special products in order to improve their profitability. So we underscore that we keep on very confident.
Yesterday, we had a 3% growth in the Brazilian market. And these numbers were recently confirmed by ANDA, 35.5 million tons, which is 3% growth in the market. So that's our expectation: we expect the Brazilian market to keep on growing. And in this scenario, we are very much committed and diligent to work on the company's Judicial Recovery and reorganization process.
Thank you.
Thank you. This concludes Fertilizantes Heringer's conference call. You may disconnect your line at this time. Have a good day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]