Results Conference Call Thursday, February the 28 th, :00 a.m. Mexico City Time Phone: (55) Code:

Transcription

1 1 Q RESULTS

2 Results Conference Call Thursday, February the 28 th, :00 a.m. Mexico City Time Phone: (55) Code: MDF Business Unit... 3 Teak Business Unit... 4 Results Analysis... 5 Environmental and Social Development... 9 Stock Performance...10 Investor Relations...11 Financial Statements

3 MDF Business Unit Commercialization The MDF Mexican market is still developing and during Q it reached a new historical record. This was mostly triggered by growth in local production, which keeps gaining ground against imports. As of the end of Q4 2018, domestic production represented 56% of the total consumption, in a market that grew 9.8% during 2018 (vs 2017) reaching 870,000 m 3. Tecnotabla has played an important role in this transition. The sales volume during Q increased by 25% compared to the one in Q As a result, we maintain a leadership position with an estimated market share of 22%, mainly supported by the high-quality boards production and the focus on value-added products. To expand the value-added market, we have been participating in events promoting the use of such products, both in trade conventions, as well as in customized face to face meetings with clients. The USA exports business maintains a strong positive trend, achieving a new sales record in Q4: Tecnotabla USA s sales grew by 165% vs Q MDF revenue growth also kept its positive trend, increasing by 47% vs Q and 5% vs Q The average price per cubic meter maintained an upward trend, and in Q it increased by 5%. This, along with the increase in the value-added products sales mix, significantly improved our average price per cubic meter. Estimated MDF Market Share Others 87% Others 79% Others 78% Tecnotabla 13% Tecnotabla 21% Tecnotabla 22% Source: Proteak Analyses, ANAFATA, SIAVI 3

4 Production During Q4 2018, production had a 37% increase compared to Q and 18% compared to Q This remains in line with management s expectations and is consistent with the plant s design specifications, both in terms of volume and quality. Because of the sales dynamism and the scheduled maintenance stop that took place in Q3 2018, during Q the plant worked continuously to cover the market s demand and recover the desired inventory levels. We keep on making progress in the optimization of the auxiliary systems that will allow us to reach our target production cost. The resin production plant is running smoothly, and the cogeneration turbine is undergoing a stabilization process and is already operating through increasing periods of time. It is important to mention that during the quarter, there were considerable increases in production costs, mainly driven by significant increases in the cost of electricity supplied by the State s utility company CFE, as well as by increases in gas prices because of the limited gas supply in the region. Forestry At the end of Q4 2018, Proteak concluded the 2018 eucalyptus plantation campaign. Furthermore, we continue with the ongoing maintenance cycle for the 2018/2019 program to ensure that plantations remain healthy and within the productivity standards. Teak Business Unit In the Teak business we maintain a low level of operation due to the current maturity of our plantations. The teak sales during 2018 of our mature plantations in Costa Rica and Mexico were used to maintain strategic relations with key clients. Plantations are developing according to plans and their value continuously increases as they mature and get closer to the harvest age. Besides the round wood market, we continue developing our cutting boards market under the trademark TeakHaus, which has been recognized by the media for its quality and value, as well as its sustainable origin. Since 2013, Teakhaus has achieved solid annual double-digit growth in sales, in 2018 sales totalized USD 3MM, reaching more than 15 countries with the USA as our main market. The short-term plans for this business are to focus on consolidating its position in the current markets, improve the business profitability and begin an aggressive expansion in Latin America and Asia. 4

5 Results Analysis I. Income Statement Sales Net sales in Q reached MXN 312MM, 50% higher than Q and 6% higher than Q In the MDF segment we saw an important increase in the average price per cubic meter. This was driven by direct pricing, as well as the accelerated growth of our US exports and value-added products. Quarterly revenue totalized MXN 285MM, a 47% growth vs Q In the Mexican market we have maintained our leadership despite the constant pressure from imports, which keep losing share against domestic production. In the USA market, sales keep growing and reached MXN 41MM in Q4 2018, representing already 14% of our total quarterly sales, which is consistent with the USA market development plans. Regarding the Teak business, quarterly sales were 82% higher than in Q This is the result of the discretionary sales of mature teak wood from Mexico and Costa Rica and the growth of the TeakHaus cutting boards business Quarterly Sales (MXN MM) Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q

6 In Q4 2018, the income from the change in the reasonable value of the biological assets accrual (revaluation) totalized MXN 20MM. Throughout the year, the company makes income accruals from the biological asset revaluations based on the expected growths. At the end of Q the biological assets revaluation reached MXN 76MM. In addition, Proteak has 1,170ha of teak plantations as part of a joint venture in which Proteak owns 50%. Income from the revaluation of this hectares is recognized as income in subsidiaries and during Q it reached MXN 19MM. Cost of goods sold, general expenses and net income. Productions costs for MDF boards were consistent with previous quarters except for the energy costs, where we saw steep increases in the cost of gas and electricity. The teak business, including Teakhaus, maintains a healthy gross margin which is in line with the annual plan and reflects the natural margins in the business and the benefit from the revaluation of the biological assets of our teak plantations. The gross margin in Q was 28%, 8pts below Q Sale prices have been getting stronger and we will continue with this strategy, nonetheless, we are still improving the production processes aiming to reach the optimal cost levels through the stabilization of the resin plant and the integration to the turbine process, which will further enhance the operating margins. Selling and Administrative expenses in the quarter totaled MXN 84MM, 17% increase vs Q This includes MXN 32MM of MDF selling and distribution expenses, which increased by 29% vs Q due to the growth in overall volume and USA exports. Administrative expenses increased by 11% vs Q During the quarter, Proteak reported an income of MXN (110)MM related to Foreign Exchange fluctuations, most of which comes from the USD denominated credit line provided by AKA-Commerzbank, where any variation on the USD/MXN exchange rate directly impacts the income statement. However, the company s FX exposure is balanced between the USD denominated credits and the Teak Biological Assets, which have USD as their functional currency The net result in the quarter considering all these effects is a net income of MXN (108)MM. 6

7 II. Balance Sheet Assets As of December 31st, 2018, the total assets for the company amounted to MXN 6,267MM, 1% decrease compared to the end of 2017, mainly caused by the net effect of the MXN 238MM capital increase, and the interest and principal payment for MXN 325MM in the year. Accounts receivable closed with MXN 205MM, which represents an MXN 80MM increase compared to December This variation is the result of the MDF boards sales growth and the increase in sales from the TeakHaus business unit. Inventory closed at MXN 228MM, a MXN 17MM decrease compared to December 2017, driven by the purchase of raw materials for resin production (which are purchased on a semesterly basis), offset by efficient management of finished product inventory and the normal reduction of harvested eucalyptus wood inventory for board production. Non-current assets accounts reflect the change in Restricted Cash with MXN 106MM, which mainly includes the monthly contributions that were made from January to July to fund the cash reserve related to the AKA/Commerzbank credit. Property, Plant and Equipment totaled MXN 3,015MM, showing a MXN 191MM decrease compared to 2017 year-end figures, driven by the depreciation of the MDF Plant for the period, and the depreciation of the USD FX, which impacts the value of the land owned by the company. The value of Proteak s plantations is mainly driven by four factors: (i) capitalized forestry expenses, (ii) exchange rate, (iii) revaluations representing the growth of biological assets, and (iv) wood outflows to cost of sales. The Biological Assets (Current and Non-Current) had a decrease of MXN 3.7MM or (0.18)% compared to December Year to date we have registered the following impacts: (i) MXN 108MM in capitalized forestry expenses for maintenance of existing plantations and preparation of new ones, looking to improve the return expectations of the plantations by maintaining growths that surpass the ones originally expected; (ii) MXN (12)MM due to USD exchange rate fluctuations that impact only Teak assets in Mexico, Costa Rica and Colombia; (iii) MXN 76MM in revaluation (growth) of our Teak and Eucalyptus biological assets; and (iv) MXN 175MM, from wood outflows to cost of sales, including harvested Eucalyptus volume and sales of Teak in Colombia, which combined account for 313,000 m3 during the year. 7

8 Liabilities and Equity 100% Liabilities vs Equity Equity Liabilities 80% 60% 40% 20% 0% Total Assets Evolution % Current liabilities decreased by 12% compared to December Accounts payable closed MXN 77MM higher than at the end of 2017, mostly because of the purchase of supplies and spare parts related to the growth of the MDF business. Other current assets decreased MXN 282MM, due to the cancellation of the liability that was registered with Diffenbacher (MDF plant supplier). This liability was canceled with the disbursement that was pending from the credit signed with AKA/Commerzbank of USD 11MM (This operation had no cash implications for Proteak). In addition, short-term credits grew MXN 131MM, due to the repayments of credit to AKA and Multiva (which will be paid-off in 2019). Interest-bearing-liabilities increased MXN 29MM compared to December 2017, which was a mix of the impact of the USD depreciation during the period, the last disbursement from the AKA/Commerzbank credit for USD 11MM previously described, as well as the principal payment of Multiva and the first principal repayment to the AKA/Commerzbank credit. Nowadays, more than 86% of the interest-bearing-liabilities are denominated in USD. Total Equity of the Company at the end of the quarter is equal to MXN 3,221MM, MXN 41MM higher than the 2017 year-end figure, reflecting mainly the conversion effect due to the USD appreciation, and the results of the exercise. Proteak continues with strong liquidity and with a solid Equity to Liabilities ratio of 1 to 1. 8

9 III. Cash flow Analysis The cash flow of the period is in line with the operation of the business. Net cash position closed at MXN 181MM, a net decrease of MXN 13MM vs the end of Q3 2018, reflecting the interest and debt payments to Multiva. At the operating cash flow level, Proteak generated MXN 257MM in cash flow in 2018, nevertheless the cash flow was impacted by the following factors: i) an increase in working capital of MXN 45MM (anticipated supplies purchase needed to produce resin); ii) forestry maintenance and other operations of the Teak and Eucalyptus businesses for MXN 122MM, iii) the payment of interests, the creation of the cash reserve for the AKA/Commerzbank loan, and other debt amortizations for MXN 325MM and iv) the capital increase of MXN 238MM that took place from Q until Q Environmental and Social Development The FSC Forest Management Certification annual audit for our teak plantations in Costa Rica was successfully concluded without any major incidents. We participated in the Stacktaking panel during the Business Forum of the Conference of the Parties XIV of the Convention on Biodiversity that took place in Sharm El Sheik, Egypt, with the support of the German Agency for International Cooperation (GIZ) We launched an in-house campaign seeking to collect toys called Jugueteak, aiming to make donations to institutions for low income children. Finally, we contributed through a donation to help with the maintenance and local festivities of a school located in Venustiano Carranza, Huimanguillo, Tabasco. 9

10 Stock Performance As of the end of Q4 2018, the OPC reached a price of MXN and a volume ok 366k OPCs. 10

11 Investor Relations Coverage Proteak OPC coverage is performed by: Armando Rodríguez Tel: (55) / 0862 Investor Relations Agency Alejandro Ramírez Arcia alejandro.ramirez@irconsulting.mx Tel: +52 (55)

12 Financial Statements The Following tables presents de Income Statement as of the end of Q in MXN MM MXN MM Q Q VAR B/(W) % FY18 FY17 VAR B/(W) % BOARD SALES Sales % 1, % Other Income % % Revaluations of Biological Inv (4.3) (100)% (14.8) (100)% TOTAL INCOME % 1, % TEAK SALES Sales % % Other Income 4.4 (5.5) 9.9 (181)% % Revaluations of Biological Inv (20.6) (51)% (31.8) (30)% TOTAL INCOME % % TOTAL Sales % 1, % Other Income 11.5 (2.8) 14.3 (514)% % Revaluations of Biological Inv (25.0) (56)% (46.6) (38)% TOTAL INCOME % 1, , % Cost of sales (246.1) (160.9) (85.2) 53% (1,046.8) (826.1) (220.7) 27% GROSS PROFIT % % Gross Profit Margin 28% 36% (8)% 20% 20% (1)% Operating Expenses Logistics and Sales Expenses (32.3) (25.1) (7.3) 29% (116.5) (90.2) (26.3) 29% Administration Expenses (51.6) (46.4) (5.2) 11% (185.2) (198.6) 13.4 (7)% OPERATING INCOME (LOSS) (5.2) (29)% (44.7) (77.5) 32.8 (42)% Operating Margin 4% 7% (3)% (3)% (7)% 4% Income from participation in subsidiaries (6.7) (26)% % PROFIT (LOSS) AFTER PARTICIPATION IN SUBSIDIARIES (11.9) (27)% 13.4 (51.7) 65.1 (126)% Financial expenses, net (145.8) (177.0) 31.2 (18)% (145.0) (95.6) (49.4) 52% PROFIT (LOSS) BEFORE INCOME TAXES (113.5) (132.8) 19.3 (15)% (131.5) (147.2) 15.7 (11)% Income taxes (0.9) (15)% (11.9) 10.3 (22.2) (216)% NET CONSOLIDATED PROFIT (LOSS) (108.5) (126.8) 18.4 n/a (143.4) (137.0) (6.5) n/a 12

13 The following tables presents the consolidated Balance Sheet as of the fourth quarter 2018 in MXN MM, compared with 2017 year-end audited figures. Balance Sheet Dec'18 Dec'17 (1) Δ Dec'18 vs Dec'17 Cash & Equivalents (72.2) (29)% Accounts Receivable (Clients) % Other Accounts Receivable (27.2) (20)% Inventory (17.3) (7)% Biological Inventory (5.9) (3)% Other Assets (13.2) (44)% CURRENT ASSETS ,008.9 (56.0) (6)% Plant and Equipment 3,015 3,206 (191) (6)% Biological Assets, mature and immature 1,839 1, % Deferred Income Tax (22) (18)% Restricted Cash N/A Joint Venture Investment % Other % NON-CURRENT ASSETS 5, ,334.4 (19.9) (0)% ASSETS 6, ,343.3 (75.9) (1)% Accounts Payable % Other Current Liabilities (282) 6% Current Debt % Payable Taxes % CURRENT LIABILITIES (71.7) (12)% Long Term Debt 1, ,858.0 (29.0) (2)% Deferred Taxes (15.9) (2)% Other % LONG TERM LIABILITIES 2, ,543.3 (44.8) (2)% LIABILITIES 3, ,163.1 (116.5) (4)% Capital Stock 2, , % Accumulated Earnings (Losses) (568.4) (430.4) (137.9) (32)% Conversion Effect (51.7) (10)% Revaluation Surplus % Other Comprehensive Income % Non-controlling interest (7) (5)% TOTAL EQUITY 3, , % TOTAL LIABILITIES + EQUITY 6, ,343.3 (75.9) (1)% (1) 2017 Audited Financial Statements % Mexico City, February 27th, Today, Proteak Uno S.A.B. de C.V. (BMV:TEAK) published its Q42018 results. This information is presented according to Financial Reporting Standards (NIF) in nominal terms. 13