Fertilizantes Heringer SA
BOVESPA:FHER3
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Fertilizantes Heringer SA
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Good morning, everybody. Thank you for waiting. Welcome to Fertilizantes Heringer Conference Call to discuss the results of the fourth quarter of 2022.
Today with us, we have Mr. Daniil Sergunin, Fernando Maeda and Carlos Alberto [indiscernible]. We would like to inform that this event is being recorded. [Operator Instructions]
Before proceeding, we wish to clarify that forward-looking statements that might be made during this call in relation to the company's business outlook as well as operating and financial projections and targets, our beliefs and assumptions of the company's management as well as information currently available to the company.
Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events, and therefore, they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of the company and may lead to results that differ materially from those expressed in such forward-looking statements.
Now we would like to turn the floor over to Mr. Sergunin who will start the presentation. Mr. Sergunin, you may proceed.
Good morning, everybody. We start the presentation with the fourth quarter in 2022. We delivered 429,000 tonnes, in line with what the company delivered in 2021 and our main crops are maintained as well. They were kept stable. And the diversity is maintained and you can see the main crops here, soybean, coffee, corn and accumulated deliveries, 1,405,000 tonnes were delivered in the year, 5.8% less than 2021.
And it is important you see that this result is much better than the market because the market dropped over 10% and the company was able to deliver better than the whole market.
We have the usual main crops here, soybean, coffee and corn. And you can see that we have a diversified portfolio.
Talking about the mix of delivered product. Now on Slide #6, please, Conventional and Specialty. We have been able to increase the Conventional products. But on the other hand, the Specialty product dropped mainly because of the investments made by farmers that decreased the result. Specialty products because of the worsening in the barter ratio.
Now we are going to turn to the financial performance, and I would like to ask Maeda.
Thank you. Good morning. On Slide #8, we have the results of the fourth quarter and for the full year of 2022. On the first line, we have the volume already informed in the previous slides, where we see that the fourth quarter of '22 was in line with the fourth quarter of '21 and a drop of about 6% for the full year, the year-to-date in relation to 2021. Main highlight in the period, the net revenue in the fourth quarter of '22 was BRL 1.56 billion with a reduction of about 7% compared to the same period in the previous year, BRL 1.67 billion.
In 2022, net revenue was BRL 5.68 billion higher by over 32% vis-à-vis 2021, which was BRL 4.29 billion.
Even with the reduction of volume delivered, the net revenue was much higher than the previous year, mainly due to the first quarter of the year. The gross profit in the fourth quarter of '22 was BRL 24 million with a gross margin of 1.5%, lower by about 95% vis-à-vis the fourth quarter of '21, which was BRL 435.3 million with a gross margin of 26.1%.
In '22, it was BRL 243.1 million with a gross margin of 4.3%, lower by 76% vis-à-vis the same period last year, which was BRL 999.3 million with a gross margin of 23.3%.
The high cost of supplies that formed our inventories physically in the second quarter of '22 had a negative impact on margins on the second semester of '22.
I would like to remind that for comparison purposes, 2021 was historically the best in terms of margin in other operating revenues in the fourth quarter. This comes from the investigation of fraud according to the material fact published in December '22, talking about the BRL 50.7 million negative because of debt.
And because of this payment, it was necessary to write net off BRL 40.8 million in property. In the fourth quarter was negative. EBITDA in fourth quarter was negative BRL 89.6 million with the negative margin of lower 5.8%, lower about 122% when compared to the same period of the previous year, which was cumulative BRL 403 million with a positive margin of 24.2%.
In 2022, EBITDA was negative BRL 26.3 with a negative margin of 0.5%, lower by 103% when compared to '21, which was BRL 870.1 million with a positive margin of 20.3%.
Net result, net earnings in the fourth quarter was negative BRL 73.5 million, lower by 4.7% than the positive result of BRL 428.6 million in the fourth quarter of '21. '22 over BRL 150 million negative, lower by 122% when compared to 2021, which was BRL 667.2 million.
On the next slide in financial results, Slide #9. Here we have the breakdown of the financial results of the fourth quarter and the year '22, and the main points here were exchange -- unrealized exchange rate on the debt over the judicial reorganization, which are in foreign currency. Positive BRL 42.2 million in the fourth quarter of '22.
In '22, we closed with BRL 58 million of positive unrealized variation with the depreciation of the real vis-à-vis the dollar.
I would like to mention that most of the debt and foreign currency associated to the judicial reorganization is long term.
Interest on loans and other financial expenses, expenses were BRL 57.9 million, an increase of 224% vis-à-vis BRL 17.9 million in the same period last year. In '22, the total expenses were BRL 219.3 million, 117% higher than '21, which was BRL 100.9 million.
The increase in financial expenses is directly related to the increase in interest rates internationally and domestically, taking into account the fact that debt from the judicial recovery is linked to LIBOR.
Besides the rate, there have been higher expense in the first half, mainly because of the price of fertilizers. The company took measures to minimize the financial impact of interest rates with short term financing by means of Heringer recorded for financing via suppliers.
On Slide #10, we show the cash flow referring to 2022. Facilitating the numbers of the period, we see that in '22, the company with cash and cash equivalent of BRL 63.4 million. The main items that make up this [indiscernible] negative result before income tax and social contribution BRL 219.2 million and the non-cash expenses, BRL 72.9 million, mainly made up by interest and exchange variation that was not realized in the period. Increase in asset accounts, BRL 86.9 million, basically concentrated in trade account receivables. In inventory, the increase in the liability accounts BRL 671 million, made up by suppliers mainly due to change in the working capital. Financing of the company and the increase in the investment activities, BRL 381.8 million.
And the BRL 381.8 million, the net -- the negative net cash flow of financing activities and net investment, BRL 65.2 million. We talked about the prices of raw materials last year. And in the first quarter, the price of all raw materials increased quite a lot and in the 3 following semesters -- quarters, the prices have been going down. And as you can see, the exact numbers are on the table, which was a fundamental trend last year. Our result is very much in line. Our quarterly result is very much in line with the global prices of imported materials.
Now talking about the Brazilian fertilizer market. It's important to mention the drop that we had during this period that is shown on the slide, which was very important, a consumption of fertilizers. And as I said before, the company decreased [Audio Gap] by 5%, the sales to this market. And I would like to once again highlight this. And the slide also talks about the domestic production and imports.
The Brazilian domestic grain production on Slide #14. It's important to highlight 2 aspects here as the reason for the drop in consumption in 2022. 41 million tonnes vis-à-vis 45.9 in 2021 because of price reasons as we said before and also because productivity or the yield, the farmers yield have been accumulating quite extensively.
And this is one of the reasons why they decreased their consumption of fertilizers and this is what happened last year. These are the figures and the fact that we wanted to share with the market.
Now we will start the Q&A session for analysts and investors only. On the left of the screen, you have a field where you can write your questions. Please standby while we wait for questions.
Mr. [indiscernible]? This is a question addressed to the fiscal accounts but you can also do this by means of the portal of the company, and then we can forward it to the fiscal accounts. So thank you.
A question about the outlook for the sector by Mr. [indiscernible]. What we see is that this year, the prices of fertilizers are already at a more balanced situation than what happened last 2 years because of the war. And we believe that the market will be more stable price-wise. And with the prices of agricultural commodities at adequate levels, the barter ratio for the farmers is good for most products such as soybean, corn, coffee, sugarcane and we expect the market to recover the volumes in 2023 vis-à-vis the total volume delivered in 2022. The first estimate that we have with that it should be about 44 million, 45 million tonnes showing this recovery.
[ Gabriel Roman ]. He's asking about the tender offer, and there is a similar question from [ Andrea ] about the delisting of the company.
The company will be informing the market complying with the law.
Regarding listed companies, and I suggest you follow the news that will be published as you receive them.
[ Paulo Roberto Roeder Jr ]. asks Slide 12 shows the imported raw material prices. Looking at this chart, we see there is a drop. The first part of the question regarding prices. Here are the market prices, in fact, and in order for them to get to our plant, there is a whole series of cost that are added to the product. We're talking about freight and nationalization and others.
Regarding the second part of your question, how do you explain the COGS.
In the last call, we have already talked about that, but it is as [indiscernible] is to buy, to store and to sell when you have this scenario.
There has been a consistent drop. The market dropped and when we started selling the market was already lower and this happens for many reasons. But one of them is the profile of our clients because we sell more to the demand market.
Please standby while we wait for questions.
Alicia [indiscernible]. Crop continuous to be the biggest producer of supplies. Well, this can happen because of many reasons. We were making our plants, there could be some component that we do not have there at a specific location, and we can buy from other players as well as we can send to the same players. But in the financial part of the presentation, you can see that there is an operation between [ addition ] and Brazilian who contains...
[indiscernible] What about the margins of other companies outside the European group?
What we can say is that according to the notice to the market that we made EuroChem transactions follow the market conditions. So the margins follow our margins as a whole. What I mean by that is that there is a difference. And with relation to the margins of other companies outside the European group, we cannot talk about that -- although it's not -- EuroChem is not a listed company, they do publish their results, but we cannot say anything about other companies' margins.
Another question from Mr. Paulo Roberto. Considering the time between the acquisition of the raw materials and the sale, could we say that the company's results respond not to the price of raw materials, but according to a [indiscernible].
There are 2 points here. When we look at the company's history, and as I said during the presentation, I talked about 2021 when the prices of raw materials went up consistently during the whole year. So we have this [indiscernible], and this is different from the scenario of 2022 when the prices dropped consistently as of the second quarter, which led to a lower price.
The other part of the question is that -- or the answer, although there is a high correlation between the price and the results of the company. The company has been taking measures in order to decrease this reliance, this dependency on the variation of raw material prices.
What was said in the previous call, if I'm not mistaken is that the company started to have or to buy in such a way as to decrease the exposure, the exposure of the company to prices. And we are also adopting other solutions in order to decrease the reliance on the raw material prices.
[indiscernible] about competition. This is the practice of having a price [indiscernible] the market, and we use some of that.
We are going to apologize this but the sound is very bad. This is what we use as a benchmark, as a reference from the market for transaction, intercompany transactions.
There are no more questions. Fertilizantes Heringer Conference Call has come to an end. Thank you very much, and have a very good day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]