Unipar Carbocloro SA

BOVESPA:UNIP6

Earnings Call Transcript 2021-Q2

[Operator]

[Interpreted]

Hello. Good afternoon, and welcome to the Unipar Conference Call for the Results of the Second Quarter of 2021. With us, we have Mr. Mauricio Russomanno, CEO of Unipar; and Christian Schnitzlein, Chief Financial and Investor Relations Officer. This event is being recorded. [Operator Instructions]

This event is being broadcast live via webcast through the MZiQ platform. It may be accessed at Unipar website at www.ri.unipar.com, where the presentation is also available. Participants may view the slides in any order, the replay will be available shortly after the event is concluded. Those following the presentation may post their questions via webcast and they will be answered throughout the Q&A session or by the IR team after the conference is over.

Before proceeding, let us mention that forward looking statements that are based on the beliefs and assumptions of Unipar management and on information currently available to the company are the beliefs and assumptions of the company as well as currently available information for Unipar. Any future statements are not guarantees of performance as they involve risks, uncertainties and assumptions as they relate to future events and therefore, depend on circumstances that may or may not occur.

Investors and analysts should understand that conditions related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mauricio Russomanno, who will begin his presentation. The floor is yours, Mauricio.

[Mauricio Russomanno, executive]

[Interpreted]

Good afternoon, everyone. Welcome to the Unipar Conference Call for the Second Quarter of 2021. We've reached the middle of the year of 2021 with many achievements consistent with our strategy. Another half year where we've been handling COVID-19 and responsible actions and strict protocols since the beginning of the pandemic has ensured the continuity of our operations and protection of our teams and the support that's necessary for society.

Our actions and results were recognized by the market with the best in the stock market in basic materials. The award was promoted by InfoMoney and Stock Pickers and was a recognition that we are very proud of after all the dedication and commitment that we've had during these times.

Can you hear me know?

[Operator]

[Interpreted]

Yes we can hear you. Go ahead.

[Mauricio Russomanno, executive]

[Interpreted]

So continue. I'm sorry about that. So this quarter was a quarter of excellent results, as I mentioned, for the company because we advanced in all strategic pillars, which are sustainability, focusing on the customers' business and people and operating excellence. Starting off with sustainability. We took yet another important step in Unipar's commitment to a sustainable future. We've announced another partnership to produce renewable energy and the objectives are to reduce CO2 emissions and ensure access to electric energy and improve our competitiveness.

This time, we've signed with Atlas renewable energy. It's a project to build a solar energy fund in the city of Pirapora in the state of Minas Gerais. And that is our second project of self-production and with that, we will achieve 50% of our energy consumption as clean renewable energy.

We're working to close projects that will take us to a 70% clean energy matrix that could be wind and solar and in Brazil by the end of 2021. We are still on the path with our actions for society. We want to be part and be present with the communities that surround our operations. In this quarter, a team of volunteers at Unipar and the community advisory council donated clothes and staple baskets in Bahía Blanca, Cubatão and [indiscernible].

Unipar has supported that with the necessary efforts to double the amount that was collected and support these communities even further. We also concluded the first group of -- the first class of the Pescar group with youth after 1 year of a course, which is social and vocational training at the Santo André unit. That project gives these young people and their families a change -- an opportunity for change. They're in extremely vulnerable situations, and they see our company as a second family. We're very proud of taking -- of having the active participation of our employees at Unipar as volunteers in training this group.

Without a doubt, it's a very transforming project for everyone. We believe so much in the education that Pescar had its first class of 8 young people, and we've announced the second class for the Santo André unit. So there will be another 20 young people trained as of September this year. The actions in favor of communities are extremely relevant to Unipar and the legacy that we want to give society.

Speaking of operating excellence, as part of a long-term plan, we continue to improve the operating performance of our plants. In Cubatão, we operated in the at 91% capacity in Bahía Blanca at 80% capacity. We also took opportunity of the shutdown of the Sao Paulo petrochemical center that takes place every 6 years to have our preventive maintenance stop an asset recovery at the Santo André unit.

Over 60 days of nonstop work with no accidents or cases as safety is something that's very important to all of us. This year, Unipar has invested in operating improvement for the past 5 years. And although we had this organized shutdown in Santo André, we still achieved the best quarterly results in company history.

In the people -- people pillar. We continue to support our employees and their families in this long critical period of the pandemic. And to measure the perception and the impact of our actions, together with GPTW, Great Place To Work, we carried out a survey with over 80% adherence of our workers in Brazil. And as a result, we found that 78% of our people believe that at Unipar, we have programs that help balance personal and professional life and 71% reinforce that the company takes care of its employees.

This result confirms the effectiveness of -- already has been implemented and gives us the subsidies to continue to invest in new ideas and actions for our employees. We have the vaccine meter to monitor how many people in our company were vaccinated and also encourage vaccination and reintegration of the employees that were on leave. In the pillar to focus on customers' business, the highlight goes into sales excellence efforts, leading to an increase in customer portfolio in developing new product applications as well as special projects for our customers.

Now I'd like to conclude by thanking the entire Unipar team for a record second half of the year. I'd also like to thank our partners, customers, shareholders, suppliers and communities for their trust and commitment in the journey towards creating a sustainable future.

Now I'd like to hand over to Christian Schnitzlein to present the results.

[Christian Eduard Schnitzlein, executive]

[Interpreted]

Thank you, Mauricio. Good afternoon, everyone. I hope you are all well. For those who are following the presentation on Slide 5, 6, 7 we present the results of the second quarter and first half year-to-date. Consolidated net operating income for the quarter was BRL 1.162 billion, 12% lower quarter-over-quarter due to the lower PVC sales volume. As mentioned Mauricio, we had an important scheduled shutdown in Santo André, in line with the general shutdowns of the petrochemical center in Sao Paulo.

I'd like to highlight the quarterly revenues of the parent company with the 25% growth quarter-over-quarter due to the higher sales volume of caustic soda and also carbonated products in addition to the increase in international prices. Consolidated quarterly COGS remained in line with the previous quarter. In the quarter, we showed a strong consolidated EBITDA of BRL 426 million, 25% drop. Quarter-over-quarter shows the result of the impact of the scheduled shut account in Santo André.

On Slide 6, the consolidated operating revenue in the first half was BRL 2.478 billion, an increase of 61% compared to [ one half ] driven by the increase in sales of soda and chlorines and by the international prices of soda and PVC as well as the exchange rate.

The parent company has an operating revenue in the first half of BRL 679 million, 29% growth compared to the first half of '20. COGS in the first half had an increase of 22% year-over-year, showing pressure on input prices and electricity rates. We achieved a consolidated EBITDA of BRL 90 million in the first half of 2021 as a result. In addition to bringing the moment of international prices also reflects actions focused on plant efficiency and reliability. The parent company EBITDA in the first half was BRL 638 million, reverting the negative EBITDA for first half '20.

On Slide 7, we show the company's [ intent ] position. At the end of the quarter, we have consolidated net debt and considering all the financial obligations, which includes debit third parties, we have a ratio of net debt over EBITDA of 0.22x. I'd like to remind you that in April, we had the sixth issuance of debentures in the total of BRL 350 million in 2 series with maturity of 2024 and 2026. The funds were used to extend the debt and normal course of business. With the same purpose in July, we issued promissory notes in the total amount of BRL 200 million following the same rates.

The strong cash generation allowed us to streamline capital allocation through CapEx and dividend distribution, maintaining liquidity and providing us fulfilling with the strategic plan of the company. I'd like to inform you that in the general shareholders meeting yesterday on the 12, a new dividend distribution was approved and delivered in the total amount of BRL 300 million to be carried out as of August 27.

I'd like to conclude my presentation by also thanking the entire Unipar team for acting with dedication and safety even in adverse environment that we've been facing for over a year. We're open now for Q&A session. If we do not answer your questions at this time, our IR team will contact you after the event. Thank you. Claudia?

[Operator]

[Interpreted]

[Operator Instructions] We have a first question from Leonardo Daniel Figueredo from [ Ingram Montage ].

[Unknown Analyst]

[Interpreted]

The first question is for Mauricio. So what's the impact in lowering the production cost and the investments in energy production? When will we see that in the balance sheet.

[Operator]

[Interpreted]

Mauricio, can you hear me? I think we have an Internet issue. But Mauricio is reconnecting. Please hold.

[Mauricio Russomanno, executive]

[Interpreted]

Thank you, thank you, Claudia. I'm back. I hope you can hear. I got dropped again. Well, the impact of lowering production costs and investment in energy and when will we see the results. Thank you for your question.

Our centers, the 2 investments in the project have different construction times so -- or deadlines. And our first project with AES. So building the wind farm already began and it will end in July 2023. And the wind farm should be started up soon and should be done by June 2022. So all the benefits in terms of sustainability, financial sustainability, and access to energy will begin when these firms are in operation.

[Operator]

[Interpreted]

Thank you, Mauricio. We have a question from the same attendee for Christian. With a frequent buyback of shares, by the company and cancellation, the lack of liquidity and the concentration of majority shareholders, is the company interested in closing and becoming private -- going private?

[Christian Eduard Schnitzlein, executive]

[Interpreted]

Thank you for your question. The company has some paths to try to streamline capital and value that for all shareholders. The buyback is one of them. And so as dividend distribution. And we use that to balance out our capital structure and provide more value for shareholders and society. At this time, we do not have any communication from the parent company to have a buyback offer. The company will always try to streamline investments and resources and try to direct that towards the capital structure deems necessary. So at this time, we do not have any directions in that sense.

[Operator]

[Interpreted]

Thank you, Christian. We have a second question from Julio [indiscernible] from Lapin Capital. First of all, he's congratulating the companies on the results. Thank you. And he's asking, If you hadn't had the scheduled shutdown, what would be the revenues for 2Q '21 in your opinion? The question is for Mauricio and Christian.

[Mauricio Russomanno, executive]

[Interpreted]

Julio, thank you for your question. Well, what would have been the revenues in 2Q '21? Well, the revenues would probably be at the same level. The difference would probably be in the results because we had to mobilize our teams. We had to get ready and have product inventories so that we wouldn't have a shortage Therefore, there were other costs associated to that. So maintenance teams, work teams, planning teams. So we had a number of other costs associated to that -- to invest at, which is a scheduled shutdown.

However, on the other hand, we had to do them anyways because we do have a cycle and our assets have to be inspected. They have to undergo preventive maintenance and adjustments such as cleaning and others.

So the shutdown may have not been that long, but would have been spread out through other moments and all of that with the purpose of ensuring that our assets are always new and ready to be used and always able to perform the best way possible without any unscheduled down time. So we might have had, had these spread out in a different way.

[Operator]

[Interpreted]

So a third question from [ Arcon Marcus ] and from Fernando. We I put these questions together. Do you expect to unfold company shares? The question is for Christian. .

[Christian Eduard Schnitzlein, executive]

[Interpreted]

Thank you for your question Marconi and Fernando. So we have a robust group of investors, and they understand the company's strategy and believe that the company is a long-term investment. With that, we know that the company is in a moment that it's valuable, but we don't plan on unfolding that because we believe that the value and liquidity is also related to value generation.

[Operator]

[Interpreted]

Thank you, Christian. We're waiting for the next question. Please hold.

We have fourth question from Rafael Ribeiro. The question is, first of all, he's congratulating us for the results. So in relation to 1Q 2021, COGS was stable and net revenues dropped 12%. Does that indicate that we would have a drop in margins in the upcoming quarters? The question is for Christian.

[Christian Eduard Schnitzlein, executive]

[Interpreted]

Rafael, compared to the first quarter and in relation to the demand to maintain PVC sales in the country, you had some additional costs, energy putting pressure on that and others that made in order so that the cost didn't drop in line with revenue, but that shouldn't be an indication for the upcoming quarters. The market works based on supply and demand. so the prices can vary and cost pressure as well. So one is not related to the other, and we have 2 quarters with different characteristics.

[Operator]

[Interpreted]

Thank you, Christian. We will hold for a couple of more minutes to wait for any other questions. Okay. The Q&A session is now over. I'd like to hand over to Mauricio and stress that in case you have any doubts or any questions you can contact the Unipar Investor Relations team. Mauricio?

[Mauricio Russomanno, executive]

[Interpreted]

Thank you, Claudia. To conclude, once again, I would like to thank the Unipar team for maintaining the entire commitment and dedication for so long and that many people are still working remotely, but having that cohesion and reaffirming the objectives and commitment towards the company and partners which are the customers, suppliers and all the others on this journey to guarantee the supply to the market. And at the same time, continuing strong in protecting people and following the safety protocols and procedures, even though we've been in this pandemic for so long.

I'd also like to highlight that we are very proud for closing or for ending an exceptional half year for the company, a record half year for the company. And that is, once again, a result of a lot of work and dedication. And we were very -- we did well in solving the challenges and at the same time, also taking the opportunities that the market gave us in this period.

To conclude, I'd like to thank everyone who trusts the company, who invest in the company and follows us closely. Please continue to support us because we are working hard so that the company will continue to grow and do the right things and have a sustainable and even more brilliant future. Thank you. Have a great weekend.

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