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Good afternoon, ladies and gentlemen. Welcome to Mills' conference call, during which we will be discussing the results of the first quarter of 2020. [Operator Instructions] I would like to remind you that this call is being recorded and simultaneously translated into English. [Operator Instructions] This call is being broadcast simultaneously on the Internet, and you may access it at ir.mills.com.br.
Before proceeding, we would like to mention that forward-looking statements that might be made during the call in relation to the business perspectives of the company, the business, these are forward-looking statements based on the expectations of the company for the future of Mills. These expectations are subject to market risks, economic conditions and other factors.
Today, with us, we have Mr. Sergio Kariya, CEO of the company; Mr. James Guerreiro, CFO and Investor Relations; and Ms. Camila Conrado, Head of Investor Relations and Governance.
In order to start the conference, I would like to give the floor to Mr. Sergio Kariya, CEO.
Good afternoon. We thank you for your interest and your participation in this call. And before talking about the results of Mills in the first quarter of 2020, we would like to talk about the COVID-19 theme due to its relevance and the measures adopted by the company in order to fight this crisis, as we can see on Slide #3.
On March 20, 2020, the Federal Senate recognized the public calamity state in Brazil due to the pandemic and the virus, which unfortunately, had already victimized and still victimizes people all over the world, also had impact on international and Brazilian economies, interrupting the growth trend and probably leading to recessions in 2020, according to the opinion of analysts and economists. Financial economic impact caused by COVID-19 started to be observed at the company as of the end of March with a reduction in the equipment rental activities. In April, as additional information for a better understanding of these impacts, we saw a reduction in the rental revenue in the Rental business unit of around 30%, but no concentration on specific sectors of the economy, and 10% in the Construction business unit. It's important to stress that we have not seen relevant effects on our payment inflow in April. It was in line with the average -- monthly average of the first quarter of '20.
As our assets, in order to tackle the crisis, the company has an experienced team, a very good liquidity, long debt profile, and we are stronger with the combination of businesses with Solaris, we have revenues coming from different segments of the economy and from different regions of Brazil. Our in-house committee is made up of multidisciplinary members, and it is exclusively dedicated to deal with the many faces of the theme, and we have more frequency in the Board meetings and implementation of many actions in 3 fronts. The first one is the health and safety of our people, their families and society in general, with the adoption of important measures, such as the increase in the modality of home office turnover in the shift for the operations people, and we make available reusable cotton masks, and also suspension of trips and events with many people. And the second is the continuity of the commercial and operating activities. By means of which we have been able to keep working over 95% of our branches all over Brazil, guaranteeing the service to our clients, and namely, those who participate in what we call essential services, for example, with operations in 7 field hospitals. And the third front is capital discipline, expense reduction and balance sheet performance, aiming at tapping the economic and financial impacts of the pandemic and improving the company's position vis-à-vis the resumption of growth. One example, we issued BRL 100 million in new debt in March. We wrote over BRL 22 million in April in Solaris debentures. We suspended investments temporarily. We have the close management of our cash flow. And whenever possible, we adopt the federal government measures, and we implement also an expense matrix management, aiming at reducing expenses but not hindering the operations of the company. We closed April with BRL 260 million in cash and BRL 70 million net cash, BRL 10 million higher than the net cash in March. This shows our financial muscle to tackle the crisis.
In spite of all that, of course, there are risks and uncertainties about the future of the economy and the respective impacts on the company. For this vision, we recurrently carried out many stressed debt based on different economic scenarios for 2020. Thus, the company has been working on successive contingency plans, placing them in practice as the need arises. And we trust we will be able to overcome the crisis, and we trust a better future of Brazil will come and for the world.
Going to Slide #4, we have other highlights of the quarter. We closed the first quarter of 2020 with an adjusted EBITDA of BRL 39.1 million, being 25 -- 29.5% higher than the first quarter of 2019 on a combined basis. And we generated BRL 33 million in adjusted operating cash flow. The consolidated adjusted EBITDA of Rental closed 1Q '20 at about BRL 40 million, being 17.8% higher than the first quarter of '19, also on a combined basis, mainly due to the higher prices in place and also the better utilization rate of the equipment and the capture of synergies with Solaris. We have already unified 11 of the 17 branches scheduled.
In Construction, we had a still negative adjusted EBITDA of BRL 800,000 in the first quarter, in line with our endeavors towards the proxy cash EBITDA breakeven in the recurrent activities of this unit.
Now talking about the results of the quarter, I would like to turn the floor over to James Guerreiro, our CFO and Investor Relations.
Good afternoon. I would like to thank you very much for your presence. Considering the relevance for Mills of the combination of business with Solaris and aiming at a better understanding of the figures of the quarter besides the consolidated information that reflect the result of Solaris in Mills as of May 2019 when the combination of business happened, we bring some analysis about combined information. Referring to the sum of Mills and Solaris results for the period, combined data may be found on Slides 13 and 17 of the presentation and Item 17 of the earnings release.
Slide 5. Total consolidated net revenue of the first quarter was BRL 126.1 million. And the Rental business unit accounted for 87% of this amount on a combined basis. The net Rental revenue of the first quarter grew by 16% on a year-on-year comparison, due mainly to the seasonality of the period that has a lower utilization rate of the rental equipment in the first quarter of the year in relation to the last. Consolidated net revenue was 4.4% lower than in the fourth quarter of '19, with an average utilization rate of 95% -- 49%, offset partially by a better price. So the combined rental net revenue of rental closed the quarter 15% higher than the same period in the previous year.
Construction net revenue amounted to BRL 16.1 million in the quarter, and Rental revenue accounted for 83% of this amount. Revenue from the sale of semi new and scrap, 6%; and indemnifications, an additional 6%. You can see that the reduction of the Construction revenue vis-à-vis the previous quarter is due to the reduction of the volume of equipment sold as semi new and scrap, in line with the evolution of the resizing project for this business unit. We can see that 85.6% of the total Rental net revenue of the company for the first quarter of '20 comes from aerial platforms, and 34.3% of the total Rental net revenue comes from the infrastructure segment. Motorized equipment accounting for 66% of this, showing the penetration of this type of equipment in the many different sectors of the economy.
Going to slide number 6. Consolidated COGS and services, excluding depreciation and the effect of IFRS, amounted to BRL 43.2 million in the first quarter of '20, representing a reduction of 6.4% on a quarter-on-quarter comparison, mainly due to the reduction in the construction indemnification costs proportional to the reduction in revenue and the reduction of costs with freight. Consolidated SG&A, net of depreciation and the effect of IFRS 16, closed the quarter at BRL 45.6 million, being 20.7% lower than the previous quarter, due mainly to the reduction in expenses of the resizing of the Construction business unit.
Now Slide #7. We show the consolidated nonrecurring item, that is to say, those referring to the restructuring of the company, the liabilities of the Industrial Services business unit sold in 2013, and also expenses in the combination of business with Solaris in the first quarter of '20. Nonrecurring -- consolidated nonrecurring items were negative by BRL 1.7 million, mainly due to the expenses with the integration with Solaris. Since the third quarter of '19, we have reported separately the expenses related to the closing and the expenses necessary to capture synergies, as you can see on this table.
On Slide #8, we have the evolution of the consolidated adjusted EBITDA of the company that reached BRL 39.1 million in the quarter, and the adjusted operating cash flow already mentioned by Kariya.
On Slides 9 and 10, we show you our indebtedness. We closed the quarter with a consolidated gross debt of BRL 187.6 million and free cash of BRL 248 million, with a net cash of EUR 60.3 million. The average maturity of the total debt of the company on March 31, 2020, is 1.8 years with an average cost of CDI plus 3.5% a year.
I would like to remind you that in March, we concluded the fourth issue of debentures of Mills amounting to BRL 100 million with a 5-year maturity, grace period of 1 year, quarterly amortizations and CDI plus 2.35% a year. In April, we extended for 1 year the Solaris debentures amounted to BRL 22 million, and that starts to mature in the first quarter of 2022.
On Slide #10, we can see a comparison of this new debt amortization curve.
Now going to Slide #11. We highlight our covenants, which are again at the expected levels. And on Slide 12, we show you some consolidated data of the last few years. Slide 13, we show some combined data of Mills and Solaris. And in the following slides, we give you some information -- additional information about the performance of each one of the business units.
With this, we end our presentation, and we are available to answer your questions now.
[Operator Instructions], [ Mauricio Hermano ] from [ Rich ], first question.
Congratulations for the results, Kariya and everybody. After these strong results, you're talking about 30% decrease of revenues in April. What can you do in terms of cutting costs and in SG&A? Do you have any room for this reduction -- additional room for this reduction because we see companies cutting expenses all the time? And the measures taken in terms of liquidity are very good and the increase in your cash. And congratulations, as I said. But don't you think it would be the time to cut fixed costs because we know that the economy will take a while in order to recover. So don't you think it would be more prudent to reduce your fixed costs right now?
Thank you for the question, [ Mauricio ]. While we are paying a lot of attention to all the alternatives and possibilities of cost-cutting in general, and as I mentioned before during my presentation, when you analyze SG&A, we have a matrix system in place and we are looking at all the alternatives, all the lines, and we also consider all the other possibilities, of course, all the alternatives and possibilities that we might have in order to cut additional costs. And when we understand that the need has come for us to put them in place, we will do this. The scenario that we still see from now on, of course, there is a very strong deterioration vis-à-vis the top line. But we still believe that there are possibilities to improve in the third quarter. And we have to wait to have a more clear visibility. This is the reason why we are not putting these stronger or more stringent measures in place yet.
What about May, Kariya? Is it having more deterioration than in April?
Well, as I said, it's very difficult to have visibility because every time, every moment, we have different views about what is happening, and we are paying keen attention to all the possibilities of lockdown or more stringent lockdowns in every city. And as we have a national coverage, as you know, we are present in many different localities in Brazil, and the moments or the timing is different among the different states and cities. And in some branches, we see a gradual recovery of the economy of that specific location. And on the other hand, we see a deterioration of the situation in other places. And our Crisis Committee meet daily so that we may evaluate each and every city and put in place the necessary measures. It's very difficult to tell you that there is an outlook for deterioration from now on. We are mentioning to you the scenario of April because there was practically no impact on our results. And as I mentioned, after that, we have this 30% that I mentioned.
Pedro Gonzaga from Pacifico.
Congratulations for the results obtained. Two questions. I was very much impressed with the SG&A in Construction vis-à-vis the fourth quarter and the first quarter. How much of that is recurrent and how much this new level will be maintained? I would like to know about the cash generation of the company for the next few months. I know it depends on each one of the scenarios considered, but what should be an additional drop in your revenues? And on the side of the working capital, will it continue at normal levels? And this quarter -- well, I think it was more in April that you had the situation of cash generation. Could you clarify, please?
This is Guerreiro. I will answer the second question because I didn't quite understand -- I didn't quite understand the second question, says the company. About the first one, we go from BRL 6 million to BRL 7 million of Construction SG&A going to BRL 8 million. And most of that were nonrecurring expenses, restructuring, et cetera. And in the last quarter, there were some additional provisions that were made. But if you look at the recurrent data like general services, 2.9 and dropping now to 2.6, and consumption, et cetera, we don't see a big variation in these items. As Kariya said, we are going after the breakeven for this business unit. EBITDA proxy cash, we had a good first quarter in this sense. And naturally, now we have to see in the second quarter the impact of the pandemic.
Could you please repeat your second question because it was not clear? Could you please repeat it?
In your cash generation, you had a balance in April. And how -- to which extent can you keep it, maintain it? On the working capital side, I understand you continue to receive your inflow of receipts. When I look at the cash flow of the first quarter, it doesn't seem to have contributed to the operating cash generation yet.
Thank you for repeating the question. This is an important point because it would be useless for us to simply roll over our debt, because we have to manage our cash. But we cannot be radical to the extent of not paying what we have to pay. So we manage our payment and sometimes we have the rescheduling of receipts from clients and clients that in this kind of situation has a negative impact that everybody has, and the same regarding our suppliers. So sometimes you have to renegotiate on both sides. But we have been able to maintain this equilibrium in our cash flow looking at our working capital.
Now talking about cash generation, as Kariya said, what we see in April is that while we expected Brazil to be growing in this period, and we expected to have a bigger flow of receipts in April, but this does not mean a delinquency on the part of clients. Of course, there is a deterioration because our clients are suffering the impact of COVID as much as everybody, but not in April yet. This is the most recent number. We still do not see the deterioration in -- on the part of the client base of Mills. I believe that the impact on the cash flow will depend on the performance of the company's revenue. And Kariya has already mentioned in April the impact of 30% in this period.
Is there an additional room for an additional drop?
Well, this is a very difficult question because Kariya has already said that we have a whole range of alternatives. So we manage our cash naturally, and we work on debt renegotiations. And of course, if we have a strong frustration in terms of our top line even stronger than we expected. We saw in April that with the actions that we put in place and the measures established by the federal government and implemented by us, we have been able to generate cash in spite of this loss of 30% of the Rental revenue. If you talk about 50% or 60% reduction in the worst case scenario, it would be reasonable to imagine that we would be forced to take more stringent measures in order to protect the company. It's difficult to say whether we can still accept or cope with 10% or 15% or 20% additional.
[Operator Instructions] At this time, we close the Q&A session, and we give the floor back to Mr. Sergio Kariya for his closing remarks. Mr. Kariya?
We would like to thank you very much for participating in our call about Mills' results in the first quarter of 2020. Our Investor Relations team will be available to you to solve any doubt that you might have. Thank you very much.
This conference call has come to an end. We thank you for participating, and we would like to remind you that the audio of this conference and the slide presentation will be available at the Investor Relations website of Mills, at ir.mills.com.br. Have a good afternoon. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]