Mills Locacao Servicos E Logistica SA
BOVESPA:MILS3

Watchlist Manager
Mills Locacao Servicos E Logistica SA Logo
Mills Locacao Servicos E Logistica SA
BOVESPA:MILS3
Watchlist
Price: 10.44 BRL -0.76%
Market Cap: 2.4B BRL
Have any thoughts about
Mills Locacao Servicos E Logistica SA?
Write Note

Earnings Call Transcript

Earnings Call Transcript
2019-Q3

from 0
Operator

Good afternoon, ladies and gentlemen, and welcome to Mills' conference call, during which we will be discussing the results of the third quarter of 2019. [Operator Instructions] We would like to remind you that this call is being recorded and simultaneously translated into English. Questions may be asked normally by participants connected from abroad, and the recording will be available at the company's website, mills.com.br, Investor Relations.

This call is being broadcast simultaneously on the Internet, and you may access it at the company's website, ir.mills.com.br. Before proceeding, we would like to clarify that forward-looking statements that might be made during this call in relation to the company's business perspectives and businesses as well as projections are mere expectations based on the company's assumptions regarding the future of Mills, and they are subject to macroeconomic conditions, market risks and other factors.

Today with us, we have Mr. Sergio Kariya, CEO; Mr. James Guerreiro, CFO and Investor Relations Officer; and Mrs. Camila Conrado, Head of Investor Relations and Governance. In order to open the call about the third quarter of 2019, we would like to give the floor to the CEO, Mr. Sergio Kariya.

S
Sergio Kariya
executive

Good afternoon, everyone. We thank you very much for your interest and your participation in this call, and it is with great pleasure that we present the results of the third quarter of 2019 of Mills. The main highlight is the year-to-date combined adjusted EBITDA in the year of BRL 21.9 million (sic) [ BRL 91.2 million ], 12% higher than the one that we had in the full year of 2018, combined, and as you can see on Slide #3, together with other highlights in the quarter.

In the third quarter of '19, we gave additional important steps in the process of integration and capture of synergies with Solaris. Since the closing of the operation up to September 30, we unified 6 of the 17 branches scheduled to be unified by the end of 2020. We integrated 100% of the commercial processes and teams and our area of people and management, SSMA and others. And underway, we have the unification of other departments, such as operations and IT and the adjustment of processes, infrastructure, systems, in the construction of a new organizational culture in line with the schedule we established.

The company reached BRL 129.4 million of total net revenue in 3Q '19 and BRL 37.8 million of consolidated adjusted EBITDA, net of the effects of IFRS 16 and nonrecurring items being 29% and 96% higher on a quarter-on-quarter basis, respectively.

At Rental, we had a combined rental revenue -- net revenue, 15% higher quarter-on-quarter, driven by the adjustment of prices and the higher utilization rate that closed September at 50%, being 48% on the average for the quarter. The company continues to operate in commercial strategies per region and per family of products with the objective of increasing consistently the level of utilization rate.

In the Construction business unit, the utilization rate of the equipment was higher vis-à-vis the previous quarter, remaining at 38%, both due to the increase in the volume rented and the reduction in the total number of equipment. Although the main objective of this business unit continues to be the breakeven of the EBITDA proxy cash in its recurring activities. And although Construction has a better performance vis-à-vis 2018, we know that this achievement within 2019 already shows that it will be infeasible once the resumption of activity in infrastructure sector is lower than expected. And in spite of all these challenges that we faced in the last few years, we have been improving gradually the performance of our business units, and we have maintained adequate management of funds of the company, and with that, we closed 3Q '19 with BRL 109.8 million in cash and a gross debt of BRL 96.6 million, resulting into a net cash of BRL 13.2 million.

Now in order to talk specifically about the results of the quarter, James Guerreiro, our CFO and IRO, will take the floor.

J
James Oliver Carneiro
executive

Good afternoon. We would like to thank you very much for your presence. Considering the relevance to Mills of the Solaris combination of businesses and aiming at a better understanding of the figures in the quarter besides the consolidated information that reflect the results of Solaris and Mills as of May '19, when the business combination was carried out, we bring some analysis about combined information, that is to say, referring to the sum of the Mills and Solaris results for the specified period. The combined data may be found on Slide 11 and 12 of the presentation and on Item 17 of the earnings release.

Let's go to Slide #4. As Kariya mentioned, the total consolidated net revenue in 3Q '19 was BRL 129.4 million, and the Rental business unit contributed 83% of this amount. Due mainly to the business combination with Solaris in May, the total consolidated net revenue in 3Q '19 was 31% higher quarter-on-quarter. And the combined net revenue of this business unit was 18% higher year-on-year and 12% higher on a quarter-on-quarter comparison, both because of the increase in the utilization rate of the equipment and the adjustment of the prices.

Construction net revenue amounted to BRL 22.3 million in the quarter, and the rental revenue accounted for 55% of this amount, indemnities 10%, and revenue from sales of semi-new and scrap 31%. Quarter-on-quarter, the Construction net revenue grew by 20%, mainly due to the higher sale of semi-new and rental revenue. As of this quarter, we started to disclose a new vision for our total rental net revenue by equipment and by sector. And on this chart, you can see that 84% of our total rental net revenue of the third quarter comes from our aerial platform and 32% of the total rental net revenue comes from the construction market and motorized equipment accounts for 64% of this part, showing the penetration of this type of equipment in the most different sectors of the economy.

Now going to Slide 5. The consolidated cost -- or our consolidated COGS, net of depreciation and the effect of the IFRS 16, amounted to BRL 42.2 million in 3Q '19 with a drop of 1.6% on a quarter-on-quarter comparison, mainly due to the lower cost for the sale of new and semi-new equipment, the extemporaneous credits of PIS and COFINS taxes and the adjustment of the provision for slow-moving inventory of Solaris in 2Q '19. The consolidated SG&A, net of depreciation and the effect of the IFRS 16, closed the quarter at BRL 55.1 million, higher on a quarter-on-quarter basis, mainly due to the total consolidation with Solaris, as in the previous quarter we considered only 2 months. And the nonrecurring expenditures for the capture of synergies with Solaris amounted to BRL 7.9 million and the adjustment of the contingencies provision and profit sharing.

On Slide 6, we show you the consolidated nonrecurring item, that is to say those referring to the restructuring measures taken by the company, the liabilities of the Industrial Services business unit that was sold in 2013 and expenses related to the integration with Solaris. And 3Q '19 consolidated nonrecurring items were negative by BRL 5.6 million mainly because of expenses with the integration with Solaris, as already mentioned. As of this quarter, we show separately the expenses related to the closing and the expenses necessary for the capture of synergy, as you can see on the table.

Going to Slide 7. The consolidated adjusted operating cash flow of Mills reached BRL 34 million in the third quarter and BRL 17 million year-to-date.

On Slide 8, we have data about our debt. We closed the quarter with a consolidated gross debt of BRL 96.6 million, and free cash amounting to BRL 109.8 million, resulting in a net cash of BRL 13.2 million. In August 2019, we amortized the second of 3 installments of Mills debentures remunerated at the IPCA plus 7% a year, amounting to BRL 61.8 million. The average total debt maturity is 1.1 year, with an average cost of CDI plus 4.43% a year.

On Slide 9, we highlight our covenants that are at the expected levels. On September 30, 2019, Mills once again complied with the original debenture covenants pegged to the adjusted EBITDA with a net debt/adjusted EBITDA ratio of minus 0.2x and EBITDA adjusted/financial result ratio equal to 9.1x.

On Slide 10, we show you some consolidated data of the last years.

On Slides 11 and 12, we show you some Mills and Solaris combined data, as we said before. And in the following slide, you see some information about the consolidated performance of each business unit.

And with this, we finish our presentation. And now we are available to answer your questions.

Operator

[Operator Instructions] As there are no questions, now we close the Q&A session, and we turn the floor over again to Mr. Sergio Kariya for his closing remarks.

S
Sergio Kariya
executive

We would very much like to thank you for your participation in the call about Mills' results in the third quarter of '19. And the Investor Relations team is available to solve any additional doubts that you might have. Thank you.

Operator

This conference call has come to an end. We thank you for your participation and wish you all a very good afternoon. The audio of this call for replay and the presentation of slides will be available at the Investor Relations website, ir.mills.com.br. Thank you very much for participating.

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