JHSF Participacoes SA

BOVESPA:JHSF3

Earnings Call Transcript 2021-Q4

[Mara Dias, executive]

Hello. Good afternoon. Welcome to JHSF Participações Fourth Quarter 2021 and Full Year 2021 Results webcast. Joining us today are Thiago Alonso de Oliveira, CEO and CFO; and myself, Mara Boaventura Dias, IRO.

We'd like to inform you that this event is being recorded. [Operator Instructions] We also have Ellen with us, Brazilian sign language interpreter, to make our communications more accessible to everyone. This event is being broadcast simultaneously on YouTube on JHSF Participações page and via webcast where the slide deck is also available. You can also access the live stream on JHSF IR website at ri.jhsf.com.br. [Operator Instructions] Before proceeding, let me mention that forward-looking statements that may be made during the conference related to JHSF business prospects, projections and operating and financial targets are based on the beliefs and assumptions of the company's management and on information currently available to the company. They involve risks and uncertainties because they relate to future events, and therefore, depend on circumstances that may or may not occur in the future. Changes in the macroeconomic conditions or in the legislation 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 let's get started on Slide 3 with the 2021 highlights. Slide 3, please. Okay. Here, you can see the main highlights of 2021. You'll see the word Record in some of them. All of the percentage changes are compared to the year of 2020. But compared to 2019, we also had significant changes. All of these numbers are detailed in our earnings release. So starting with the record gross revenue of BRL 2.2 billion, up 74.7% versus 2020. There has also been a significant increase compared to 2019, up 218%, and a record adjusted EBITDA, consolidated adjusted EBITDA of BRL 1.2 billion, up 77% compared to 2020. The 2019 increase was also very expressive 519%. And finally, a record net profit, almost BRL 1 billion, BRL 981 million, up 54.4% compared to 2020. Now about our business. We also had operational results that were quite robust, starting with the sales of real estate development, a record BRL 1.6 billion in sales, 18.9% increase compared to 2020. In shopping malls, tenant sales increased significantly compared to 2020. And you can also see the comparison with 2019, which was a prepandemic period, and we already had a 2.5% increase compared to that prepandemic period. The same-store rent indicator increased by 50.3% compared to 2020. And you could also see here highlights compared to the 2019 numbers, a prepandemic period, an increase of 15.5%.

Now in terms of hospitality, an average daily rate increase of 27.1% compared to 2020. And there has also been a 40% increase compared to 2019, which is important to emphasize. And the average couvert in restaurants has achieved an increase of 26.3% compared to 2020.

And finally, our Executive International Airport, a 125% increase compared to 2020, quite significant. And fuel supply to airport has had an increase of 163% compared to 2020.

Another highlight that I didn't mention was ESG sustainability. We completed the company's commitments in 2021. There will be targets that will be set based on them, and they will be released this year. So these were the highlights.

And now I'd like to turn the floor over to Thiago, who will give you further details about each one of the segments. Thiago, you have the floor.

[Thiago de Oliveira, executive]

Thank you, Mara. Good afternoon. Ellen, thank you for joining us once again, helping us to improve our communication and give access to a larger group of people.

Now let's move on to Slide #4 in our presentation. I would like to start by giving you details of how we achieved the results that Mara summarized for us. Basically, the main message we would like to convey to you is a message of growth of our net revenue at the company comparing quarter-to-quarter and year-over-year. We had a 70% increase in revenues coming from real estate development and an EBITDA growth at almost the same level. So we were able to preserve the EBITDA margins in that division at around 75%, which makes us really happy about the results that we delivered. From the qualitative perspective, it is important to emphasize that the Boa Vista Complex continues to be very important for our company. In the last 2 years, we introduced 2 new products in that region, Boa Vista Village and more recently Boa Vista Estates. And as we can see, on the pie charts on the slide, both of those projects had a significant share in the total sales of the company. This gives frequency of a product, Fazenda Boa Vista, that has reached the end of its stock. So I think we were able to migrate really well to 2 new projects in that same complex, which can help us explain that good sales performance achieved last year.

Now let's talk about shopping malls, retail and e-commerce. So here, we can also see good growth. If you look at the Q4 '21 against Q3 2020, we had a 25% growth. Q4 '20 was a strong quarter. We worked the whole year in 2020 without major restrictions. And so the quarter-on-quarter growth is actually a great comparison. Now if we look at year-over-year, the 56% growth that we achieved, we can say that the year of 2020 was worse than 2021 in terms of operation of our tenants in the shopping malls.

So when we compare these numbers only to the 2020 numbers can give us a mistaken message. But when we compare to 2019, we also see significant growth. As a reminder, 2020 and 2021 were both years in which there were some type of restrictions to the tenant's operations, which was not the case in 2019. So when it comes to actual growth, we are quite satisfied with our deliveries here in terms of tenant sales.

Now on the lower left side, you can see our operational indicators. We should highlight that all of the AS indicators were positive. We had double-digit numbers, which once again shows the quality of the malls both for customers and tenants, which represents a good source of revenue for the company as well.

Now looking at the right-hand side of the slide, and net revenue, when we compare quarterly and annually, we see significant growth in both. Once again, I'd like to highlight that this is a quarter in which there has not been any linearization of the pandemic effects. So these are revenue numbers for our tenants. And we could also notice through all of the quarter, a recovery of the adjusted EBITDA going back to prepandemic levels. Although in great part of 2021 for some activities, especially those that are service related, we had a more flexible posture. And in order to accommodate some of our tenant partners that we're still recovering from this more complex period of the pandemic.

Now let's move on to Slide #6, where we will talk a little bit about Hospitality and Gastronomy. So when we looked at all of the indicators here, we can see that we have achieved not only growth, but significant growth compared to 2020 as well as compared to 2019. And this enables us to tell you that from the perspective of results, we have already exceeded the numbers that our company was delivering in prepandemic times, although these businesses were hardly hit in 2020 and in 2021. So once again, our management team at the company did an exceptional work reverting a negative EBITDA in 2020 to a positive EBITDA in 2021.

Now moving on to Slide #7. Let's talk a bit about the airport. In recent quarters, we have shared with all of you the growth of this more recent division of our company. This quarter was no different. We had quarter-on-quarter as well as year-over-year significant growth, movement and fuel sales have also been growing at significant levels. And at the same time, the company has been starting the second capacity expansion of the airport. This airport is already the largest in Brazil in terms of hangared aircraft, the number of aircrafts using the airport, and there is a growing need for hangar space, which makes us feel reassured in continuing our capacity expansion at the airport.

Now let's move on to Slide #8. Talking about our consolidated results, Mara has already mentioned this. But if we look at gross profit and net profit, you can see that the company has increased its numbers compared to 2020. And we also have numbers here to compare to 2019.

Now I'd like to pause the presentation to thank our customers and business partners for all the support they have given us throughout this whole period. And I would like to mention the excellent work by the 4,000 people at JHSF team on a daily basis, which enables us to achieve these amazing numbers that we are very proud to share with you.

And before I close my presentation, I would like to go on to the next slide where I will tell you a bit more about the cash position of our company and our debt levels.

In the bar chart in the upper left corner of the slide, you can see a comparison of our cash position, plus performed receivables of our company and the amortization schedule of our debts on December 31. So it was like that in December. But now in February, we have just finished this raising from debenture that enabled us to refinance debts that would expire in 2022 and that now will expire in 2026 and 2027. So as part of our management strategy in terms of the cash structure and debt structure of the company, this was an important event that I wanted to share with you. Now when it comes to our debt composition, there hasn't been any major change. You can see the charts there on the slide. So after issuing the debenture and comparing that to the end of last year, there hasn't been any major change, and no other highlights are needed here in terms of our debt composition.

This concludes my presentation, and I would now like to open for questions.

[Mara Dias, executive]

[Operator Instructions] Okay. Let me check the questions that we have received. So Thiago, we have a question. We actually have more than one question on the same topic, which is the macroeconomic environment and higher interest rates. What are the possible impacts on our speed of sales and real estate development? Do you think this can also affect the high-end segment with malls and consumption levels being impacted?

[Thiago de Oliveira, executive]

Well, whenever we have movements in interest rates, we expect to see some kind of impact on the business. Last year was a year in which we saw the interest rates curve going up. There was an upward trend in interest rates in general, and hence the results that we just shared with you. This is a topic we keep a constant eye on. And we've experienced similar situations in the past, and our team is extremely experienced to be able to navigate adverse times if they do materialize.

When it comes to the market niche where our company operates, I think it has a consumption capacity that is higher than most of the other market segments. So in case there are adverse events, they're usually smaller than the effects for companies that have a different positioning strategy than ours.

[Mara Dias, executive]

Great. Okay. Now the next question is also about the external environment but more focused on the Omicron variety. Have you seen any impact in malls, hotels and restaurants in the beginning of 2022?

[Thiago de Oliveira, executive]

Well, the answer is no. We actually saw a very promising performance in those 2 divisions you mentioned in the first 2 months of the year. So although people are a bit more careful now, we have not felt a negative impact on the businesses that are more exposed to the flow of people.

[Mara Dias, executive]

Now about the shopping malls segment, there is a question here saying that operational indicators in terms of sales, and rents are very strong. Is there any other space for us to increase our rental prices and charge a bit more?

[Thiago de Oliveira, executive]

Well, our strategy always looks at the sustainability of the business from a broad perspective. We think about profitability for the company, profitability for tenants and the mix for our customers as well. So the work we do is the work that tries to balance out all these 3 variables. So I'd say we are quite happy with the profitability level provided by our company's assets. So we'll probably continue with the same management profile we have had for a long time now.

Okay. Now -- well, before you move on to the next question, let me just add something to my previous answer, which is also related to the profitability we were just discussing. I think it is really important that we remind everyone about 2 aspects. First, we do not linearize results here at the company. So when we compare to other companies that have -- like linearized results, we can have a mistaken perception of profitability.

Now the second aspect is that in 2021, we work and will continue to be, for as long as needed, partners of the tenants that have suffered a greater adverse impact on their businesses throughout this period of time in which we had restrictions put in place due to the COVID-19 pandemic. What we noticed is that in spite of all that, the profitability of our company in that business is quite healthy, quite sound. So we believe that once these restrictions are lifted, we believe our profitability will grow since we won't have to keep on providing support to these partners of ours.

[Mara Dias, executive]

Great. Now the next question is about the airport and the hangar demand with the new expansion.

[Thiago de Oliveira, executive]

Well, we have almost delivered the sixth hangar. I mean the sixth hangar that we delivered in the beginning of February is almost all occupied. And the building of the other hangars continue. And as I said, we are quite active and we see a great demand of hangar space. So with the airport, this is a medium- to long-term project. And as a company, I believe that we are taking the steps that we planned when we started. I would actually say that we are more advanced when it comes to the offer of hangar area, and that's very much related to the demand level that we have received from our customers. And not only in Brazil, but also globally, we've seen significant growth in the demand for executive jets. So in the medium and long term, that will probably represent a larger fleet of aircraft to be hangared. So we believe this is something positive considering the options that our company took to participate in that market. The choice that we made to participate in that market.

[Mara Dias, executive]

Okay. Now we have 2 questions about costs. One is more general about the cost level in each segment, whether they are at the right level or if there is any type of pressure because of the macro scenario. And the other one is about real estate development, if a POC evolution can give us a weak DRE.

[Thiago de Oliveira, executive]

Well, I think costs are always an attention point for all companies, or at least it should be. So we are tracking that from up close. And the company has some costs to incur that are coming from contracts that our company has with customers based on inflation indexes. So for construction, we use INCC to index our contracts to be performed so as to be protected from hiking costs. It's also important to emphasize that if we have an increasing cost scenario, there will also be a price increase. That's also a strategy of our company to preserve part of the VGV of real estate development as stock, which helps us to recompose our margins.

So after the results of 75% EBITDA margins for real estate development, I would say we are at a very healthy level even above what we expected in terms of performance for that division. So I think that the product differentiation delivered by our company helps protect our operating margins in our businesses, either in real estate development, malls or even Hospitality and Gastronomy. And we see the same thing happening in airports as well.

So overall, we are paying attention to the issue of costs. But at the same time, we are navigating well and keeping our margins.

[Mara Dias, executive]

Now we have a question related to cash flow. How will we delve the distribution of dividends that we announced and the volume of launches, of new real estate developments and shopping mall expansions?

[Thiago de Oliveira, executive]

Well, Mara, we are always monitoring the cash position of our company, and the operational cash generation happening on a daily basis. We know about the investments that the company intends to make in the short and medium terms, and we also monitor from up close the financing flows.

In today's presentation, we talked a lot about operational indicators, and we see some healthy numbers. We also talked about the refunding of some of the debt that would expire in 2022. And we didn't talk about investments, but we do have investment plans that go from the airport that we already mentioned, at self-finance levels at the airport, considering the results of the operations themselves, to shopping malls where we have been making investments that demand some type of capital allocation, especially so in the expansion of the Cidade Jardim Mall that will be open soon. So we will no longer be a cash consumption asset. So we will reduce the investments there, and we'll see an increase operational flow. And at the same time, we've been advancing with the expansion of the Catarina Fashion Outlet.

So overall, when it comes to malls, our plan sees that half of the investments will be financed by the cash generation itself and another part will be financed by proceeds that the company already has in its cash or proceeds that were raised in the form of equities in recent years. So we are very comfortable when it comes to our cash position, operational flow, CapEx and financial debt amortization. We are at a good balance, and this is very well aligned with our strategy. And the company has been achieving a dividend flow and keeping that flow in order to compensate its shareholders. With the dividends that we announced yesterday in the last 12 months, we would have made a distribution of around BRL 400 million in dividends to our shareholders.

And that's not all. The company has also been using an operational cash generation, which is really strong, to recompose our land bank and to repurchase shares in order to better manage our capital structure. So I would say that we are executing our long-term strategy and managing the strategy considering the short-term scenario as well.

[Mara Dias, executive]

Okay. You mentioned the expansion of Catarina Fashion Outlet. And we have a question here about shopping malls expansion. About the Catarina Fashion Outlet expansion, you're planning that to be done at the end of the year. Are you planning to do that earlier? And what's the tenant or the stores mix going to be like? Do you have a project in mind for that?

[Thiago de Oliveira, executive]

Well, I don't think that we should make a commitment here to have that expansion ready for the Black Friday event, so earlier than planned. But if we do have an interest in doing that, we'll help our tenant partners so that they can have a point of sales in an outlet with such a good performance as Catarina's.

Now when it comes to the stores mix, that's going to be exactly what our companies like, high-end retail, restaurants, creating an atmosphere that will feel familiar for those who already visited the Jardim shops. So the performance that the shops have achieved for the tenants and for the company has given us great feedback as well from the part of customers. And these are things that encourage us to continue implementing our product mix strategy for the Faria Lima project.

[Mara Dias, executive]

Okay. A follow-up question on shopping malls. What is our strategy on capital recycling? Do we have any short- to medium-term strategy for those investments?

[Thiago de Oliveira, executive]

We are always analyzing alternatives to recycle capital in that division, but I cannot give you further details about that because of regulatory issues.

[Mara Dias, executive]

Okay. One last question here. Because the questions are very much interconnected, but there are 2 questions here that are about the same topic. So you talked a bit about consumption, but they are asking about real estate development sales in the beginning of the year. What is it like right now? Considering this challenging scenario, what are your plans to launch new real estate development projects?

[Thiago de Oliveira, executive]

Well, our behavior is the same. We are monitoring demand and launching the products in a phased session so as to serve the demand that we see. So I don't want to be repetitive. We have already talked about the strategy in today's call, but this is part of our management to monitor demand in all 3 regions where our company has a land bank and execute that plan.

I want to remind you all that our project for the real estate development are not a very short-term project. Within our company, we have a land bank that allow us to, in the next 15 to 20 years, have significant results for our investors. And our role here is to find the right pace to execute that according to market conditions. So some of the periods will be more favorable to specific projects, and others will be less favorable. But the way we manage that division always tries to preserve the net value of this land bank, which is quite hard to replicate, especially with the profitability levels that we have been achieving, which is fruit of the differentiation and quality of those products and how much they have been able to improve the quality of life of our customers. So if we follow that rationale, we'll see the essence of JHSF itself, a company that has as a purpose to increase the quality of life of the customers with a very strong commitment to quality and excellency. So our cultural framework is very much present in what we do on a daily basis with this team of 4,000 people that has been working really hard to improve the quality of life of our customers.

[Mara Dias, executive]

Okay, Thiago. These are all the questions we have received. If you still have questions, please get in touch with our IR department via e-mail. Thank you very much, Thiago, for your presence, and thank you, Ellen.

[Thiago de Oliveira, executive]

Thank you, Ellen, for being with us yet another quarter. Congratulations on the work that you've been doing. We have received many compliments on your participation in the events with us.

I would also like to take this opportunity, Mara, to thank our partners once again, all of our business partners as well as the team that has been working nonstop on a daily basis in order to deliver better results to our shareholders.

I would also like to thank the shareholders for the trust they have put and the work of our team, and let's look ahead at 2022.

We have a vision for the future, but we always see our feet on the ground. So this is my last message for today's conference call. Thank you all very much for joining us. And once again, as Mara said, if you still have a question that has not been answered during today's conference, you can get in touch ri.jhsf.com.br, and our Investor Relations team will get in touch with you to answer your question. Thank you once again. [Statements in English on this transcript were spoken by an interpreter present on the live call.]