JHSF Participacoes SA

BOVESPA:JHSF3

Earnings Call Transcript 2021-Q2

[Mara Dias, executive]

Good afternoon, everybody, and welcome to the JHSF Participações S.A. Conference Call for the Results of the Second Quarter 2021. We have with us Thiago Alonso de Oliveira, the CEO; and myself, Mara Boaventura Dias, the IRO.

This presentation will be recorded. [Operator Instructions] We also have an interpreter to increase the sensitivity in our communications.

This event is being broadcast simultaneously via YouTube and webcast, and you can access this at the IR side of JHSF at ri.jhsf.com.br and through the MZiQ platform where the presentation is also available for download. [Operator Instructions]

Any forward-looking statements that may be made during this conference call regarding the company's business prospects, operating and financial projections or goals are based on beliefs and assumptions of the company management as well as information currently available to the company. These forward-looking statements involve risks, uncertainties and assumptions, and they depend on circumstances that may or may not occur. Changes in the general economic condition, industry conditions and other operating factors may affect the company's future results and lead to results that differ materially from those expressed in these statements.

I will now give the floor to Thiago, who will begin the presentation. You may proceed, Thiago.

[Thiago de Oliveira, executive]

Well, thank you, Mara, for the presentation. It is a pleasure to be with you here to help you in the conference call. We're going to have a very quick presentation on the business performance consolidated results. And Mara and I will help you on the question-and-answer session.

Let us begin with the development throughout the second quarter of this year. We had a growth in sales of 66%, growing BRL 350 million in sales from last year to BRL 560 million this year. We would like to highlight that there was an expansion not only in sales but a greater distribution between the company projects, generating the sales volume.

Now with this, net revenue grew 139%. We got very close to BRL 560 million in revenue compared to BRL 234 million last year. And adjusted EBITDA went beyond, BRL 422 million compared to BRL 166 million -- BRL 167 million in the second quarter of last year. Very generally, this was a good quarter in terms of sales. With the beginning of the third quarter, we observed a constant pace as we saw during the second quarter in terms of sales and demand for the development products at JHSF.

I would like to highlight that during this period, our revenues reached BRL 442 million. For those who follow up on what will be realized, this is the magnitude that we're referring to. This is revenue that will go through our company in the coming quarters. Accounts receivable, BRL 920 million approximately. Accounts receivable that are indexed to the IPCA, indexed to the IGP-M as well as other indices. And we have BRL 440 million of accounts receivable. And part of this are pegged to the INCC. With this, offering us a good protection in terms of cost for the company as we go forward with price soar that we have observed and the tenor in the market.

We go on to the next page, please, where we will look at the indicators for the malls and retail as well as the digital. We carried out a comparison with 2020 as well as 2019 in terms of the company indicators, which you will see to the bottom left. If we look vis-à-vis 2019, which is what stands out more, same-store sales, we grew 11.5%; same-area sales, 9.9%; same-store rate, 8.7%; and SAR, 9.3%.

Now this shows us that despite the fact that in the second semester of 2021, we underwent some months, especially the month of April, with an increase in restrictions, we were able to grow vis-à-vis 2019. That is to say before the pandemic. When we look at the bottom line where the comparison is with the year 2020, the figures are quite expressive, almost fivefold more than what we observed last year. That is why think the most appropriate comparison for you should be carried out based on the second quarter of 2019. I would like to highlight that the month of May was better than April. June was better than May and July ever better than June. So we do observe a significant recovery when it comes to the sales that we observe in our malls.

And speaking about sales, at the top of the graph, still to the left, you'll see the tenant sales vis-à-vis 2019, an increase of 16%. If we compare this to 2020, an increase of 560%, highly expressive figures when compared to the year 2019 and 2020.

In terms of net revenue, here we have a comparison compared to the second quarter of 2020. I would like to remind you that since the beginning of the pandemic, JHSF decided not to work with the linearization of the COVID effects. So what you see here in the statement is what, in truth, is happening. We see a growth of net revenue of almost 480% and a growth of adjusted EBITDA of 450% vis-à-vis last year, which means that we're returning to levels that are closer to what we had in the pre-pandemic period, of course, despite having some discounts that are selectively granted to our store tenants.

Our occupancy rate is 96%. Cidade Jardim and Catarina Mall represent 80% or more than our GLA and our revenue generation. The figures are closer to 100% than the 96% that we observed on average. And retail and digital gross revenue had a growth of 661%, practically 7x what we have observed in this quarter vis-à-vis the same quarter last year, with a highlight to what we observed in CJ fashion, 45% growth; Concierge, 421%; and CJ Food, compared with the first quarter of '21, 28% growth. Therefore, we see that the digital initiatives are moving forward, an advance in the malls and advance in digital as well as advance in the digital area.

Next page, please. In Hospitality and Gastronomy, an evolution in the average daily compared to the year 2020 as well as 2019. RevPAR nowadays at the same level at which it was in 2019, 143% higher than our position in the same period last year. With this, we see the net revenue of this division grow sevenfold, 7.5x, from BRL 5.4 million to BRL 45 million. In terms of number of couvert sold, we're somewhat below the pre-pandemic period, showing that we still have good space to recover.

And as I mentioned previously regarding the malls in the month of April, well, May better than April, and June being better than May, we observed the same thing in terms of Gastronomy as well as in Hospitality. So there has been a reconversion in our figures. Average couvert, we observed a growth of almost 20% vis-à-vis the same period last year despite the growth of 5% when compared to 2019. What we have observed, that resulted from the closing of restaurants in earlier schedules, was a decrease of the consumption of wine. And of course, this has an impact on the average composition of COVID. When it comes to adjusted EBITDA, we went from minus BRL 12 million in the second quarter '20 to a positive BRL 9.2 million, once again showing the recovery and evolution of this business when the economy became more flexible.

Next page, please. When it comes to the International Executive Airport, we had a growth vis-à-vis the second quarter of '20 of 205% in landings and takeoffs. This refers to the growing maturity of the airport and the capacity expansion that we had at the end of last year. Now if we look at the fuel, the growth has already been quite similar, 210%. And in June of 2021, we concluded the internationalization stage of the São Paulo Catarina. It is now an airport that is ever more adapted to the needs of executive aviation. Our net revenue grew 86% year-on-year, and we had some nonrecurring extraordinary expenses that brought our EBITDA to BRL 0.8 million compared to BRL 1.3 million in quarter of 2020.

We now go on to the next page. With all of this, we see the company's consolidated results, beginning with a growth of net revenue of 162%, BRL 662 million in revenue in the second quarter of this year. Our gross profit grew in line with net revenue. Adjusted EBITDA also very much within that growth range but not in the same amount because we have some expenditures with marketing due to the launch of new products. Now this ended at the end of the second quarter, but it did have an impact on the balance. And in terms of net revenue, we generated BRL 321 million, a 26% growth vis-à-vis the second quarter of last year. Now this quarter, differently from the second quarter of last year, did not have materiality in terms of the property results for investment.

With this, I would like to give the floor to Mara to continue on with the presentation.

[Mara Dias, executive]

Thank you, Thiago. In the ESG initiatives, environmental, social and governance, I would like to highlight some.

In the environmental part we're recomposing the greenery of the projects that we develop. We recompose all the flora and fauna, and we have almost 5 million square meters of environmental preservation. In the social part, we continue to have partnerships that are strengthened, and we have a Diversity Committee. After the inclusion program, we created a committee to have a more inclusive and diverse working group. Now the work of women is a highlight. Most of the holding is made up of women as well as the statutory Board. In governance, we have 75% of the members in the Board that are independent and 7 advisory committees. And these members are part of all the committees. We also have a Fiscal Committee, which means we have a very robust governance.

In the second quarter, we concluded the diagnosis of our business sustainability. We have the materiality that is concluded within ESG. And the next step is to set forth long-term goals for the company's strategic guidance in this field.

Next slide, please. And finally, based on everything that has been said by each business and the consolidated results, we do have some highlights of the business. Once again, based on the results presented, net revenue and gross profit, very similar, net revenue with an increase of 162% vis-à-vis the same quarter; gross profit, 165.3%; EBITDA, 158%; and net income, 26.5% vis-à-vis the second quarter '20.

In real estate development, we had the prelaunch of Boa Vista Estates. This is a third development and a growth with sales. In malls, we have already spoken about this, a gradual growth with a good May, June better than May, and July better than the 2 previous months. In retail and digital, an expressive growth through both national and international brands, and a growth in digital platform with a very significant growth of 661% of gross revenue.

In Hospitality and Gastronomy, the highlight is for leisure hotels, we now no longer have restrictions, and in the opening of Hotel Fasano 5th Avenue in New York. In the airport, the highlight was the internationalization. The airport can offer full services. And finally, we paid out dividends in April in the second quarter of BRL 144.4 million. And in the last 12 months, the payout is BRL 245.4 million (sic) [ BRL 244.4 million ] paid out to shareholders.

With this, I would like to conclude the presentation. We will leave with you the QR codes that we have for partnerships. Simply turn on your cameras and your cell phones, bring your camera close to the QR code. And if you wish to donate to any action, please identify yourselves. In the meantime, we will poll for questions.

[Mara Dias, executive]

[Operator Instructions] Very well, Thiago. Are you ready for the questions?

[Thiago de Oliveira, executive]

Okay, Mara. I was here making a donation.

[Mara Dias, executive]

Wonderful. That's what the QR codes are for. And congratulations for that initiative. I have had feedback from other investor IROs who are going to begin to use this. The question, if we have a forecast for the fourth development of Boa Vista. The land was purchased in June.

[Thiago de Oliveira, executive]

Not yet, but as soon as we have news as we did with the estates, you will be the first to hear about this, both shareholders and the market as a whole. We will offer you more information on the project.

[Mara Dias, executive]

We have 2 more questions referring to inflation and the cost of inputs, which is our outlook, in which business lines this has had an impact or not.

[Thiago de Oliveira, executive]

Very generally, we have followed up on this in some of our raw material inputs. We observed a growth in cost. And we have been able to transfer this to price or through the indexation of accounts receivable, which is something that happens a great deal in real estate developments, or adjusting prices when it comes to Gastronomy.

[Mara Dias, executive]

We have a question here that I think you already mentioned. In the second quarter, we had a sales performance for leases and in restaurants and hotels that are better than in 2019. The question is, how do we consider these indicators for July flow and volume of sales?

[Thiago de Oliveira, executive]

Well, when it comes to sales volume, we have had a sequence of months of improvement: May being better than April, June being better than May, and July being better than June with an increase in the sales volume. And I think the same will apply to restaurants. The first refer to malls, and there seems to be a more significant recovery of business hotels.

[Mara Dias, executive]

Very good. And they would like you to explain somewhat more about the launch of the estates, what is it about. And they asked again about the fourth project.

[Thiago de Oliveira, executive]

The Boa Vista Estates is the third project of JHSF in the Boa Vista Complex. It was developed with land that begin with 20,000 square meters. What we used to call in the Fazenda Boa Vista Estancia. It is a project with less square meters in the development. This is the most exclusive development among the 3 that have been launched by JHSF in the Boa Vista region.

[Mara Dias, executive]

In terms of the resumption of sales of store owners and the sales of our malls, if this was in the luxury segment or does it apply to all the segments? Is there one segment with a better performance than another? And once again, a question about July and August.

[Thiago de Oliveira, executive]

The service sector within the malls is still showing a performance that is somewhat below, especially when it comes to international brands that are at the other end. This is a piece that is growing very strongly, more than the average. So we have 2 different extremes. The cinemas, the sports academies are suffering more. But it's very simple. We understand the reason it refers to the existence of restrictions in terms of operating schedules and the use of their capacity. While at the other end, in the luxury brands, we observed a truly excellent performance.

[Mara Dias, executive]

Outstanding. In our Catarina Complex, the question is about the expansion of the outlet and if we have an outlook for a launch, and the sales of the Catarina Outlet.

[Thiago de Oliveira, executive]

Thank you, Mara. When it comes to the Catarina Outlet, we already have work underway. We are quite confident in terms of the sequence of the development of the Catarina Fashion Outlet. For those who do not know it, it is the largest and the best fashion outlet in Brazil. Part of that strong growth that we have observed in sales, in the sale of malls, is perhaps anchored by the Catarina Outlet as well as the Cidade Jardim Mall. So we're quite confident in terms of the physical expansion of these 2 assets, which is what we're doing at present, not only expanding the Catarina Outlet but also expanding the Cidade Jardim Mall.

When it comes to Catarina Town, we are well advanced in terms of the development of the master plan. We have held frequent meetings with the architectural offices that we contracted that are working on the master plan. And very soon, we hope to have some novelties in terms of the progress of this project.

[Mara Dias, executive]

Thank you, Thiago. In terms of the village. We spoke in the release that we pushed back the launch. And the question is if we continue with this pace, can we speed up the future stages? And which is the last stage that has already been launched?

[Thiago de Oliveira, executive]

We have a forecast for the village of 8 phases. The initial plan was to launch each of the phases with an 18-month interval between them. We have already launched 3 phases in a period that is lower than 24 months, which means we're ahead of our initial planning. And whenever we realize that there is space for this, we're going to speed up the launch of phases. If we perceive that there are negative movements, of course, we will slow down. It's interesting to work with developments in a phased way because they allow you greater flexibility to work with the launch according to market conditions.

[Mara Dias, executive]

We have a last question here. We can close with this question. A question about the financial strategy, if in our financial investments, we have some sort of hedge.

[Thiago de Oliveira, executive]

Because of the increase of Selic, the answer is yes. Most of the company cash is associated with a post fixed rate, the CDI. And of course, this offers us quite a bit of tranquility because of the mismatch between the cash applied and a significant part of our indebtedness. I would like to remind all of you that besides the company's cash position that is protected, thanks to this, our accounts receivable is also indexed to the INCC [Foreign Language], which means we do have protection for the cost of development and inflation. And in our [Foreign Language] portfolio, and you should look at the release, you will be able to see that this receivables account is based on the IGP-M, IPCA and, in some cases, a prefixed rate or the CDI itself. So we don't see any significant mismatch between the indices of the company's liabilities with the indices used for the assets of the company.

[Mara Dias, executive]

Another question that I deem to be interesting that we did not have in the Q&A., what is happening to the demand of new landing strips in the airport with the internationalization?

[Thiago de Oliveira, executive]

As soon as we had the internationalization formalized, we saw a very rapid movement of clients. Clients who had their aircraft...

[Technical Difficulty]

[Mara Dias, executive]

Well, Thiago -- very well, he reconnected. A very quick problem -- once again, a drop in connection.

As soon as we had internationalization, we had a minor idle capacity, and we now have a heated sale. And so the second semester, we will once again proceed to building new hangars. We can absorb 15 or 20 aircraft additionally. Therefore, we will have another expansion very soon.

That was the last question as well. I'm not sure, Thiago, will be able to connect again. If he does not connect, we would like to thank all of you for your participation.

Once again, the IR side is at your entire disposal. We have all of the material available for you. Should you have any doubts, you can hear the replay on YouTube or on the site. If you continue to have doubts, please send your e-mail to jhsf.com.br/ir or contact us through the telephone at [phone], JHSF-7453.

And an invitation to visit our YouTube page. For those who are not listening to us through YouTube, we have a YouTube channel, JHSF Participações. And once again, thank you for your participation.

Thiago has connected again. I was just speaking about the IR channels.

[Thiago de Oliveira, executive]

I do apologize. This does happen. I did have a technical problem, but I'm sure Mara was able to convey to you the closing remarks, the airport project.

And on my behalf and on behalf of the JHSF management, our special thanks to our team of associates for the exceptional work they have carried out for another quarter. Our thanks to the clients for the support they give to the company and to our business partners with which we are extremely satisfied when we see the significant recovery of their sales and the gradual resumption of their business.

I wish you a great deal of health. Please keep safe, and I hope that the situation in the country continues to advance in a sustainable way. And well, my greetings, my virtual greetings to everybody.

[Mara Dias, executive]

Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]