Results Conference Call Tuesday August 1 st, :00 a.m. Mexico Time Tel: (55) Dial in Code:

Transcription

1 2Q17 Results 1

2 Results Conference Call Tuesday August 1 st, :00 a.m. Mexico Time Tel: (55) Dial in Code: Relevant Issues and highlights after Q MDF business unit... 3 Teak business unit... 4 Results analysis... 5 Environmental and Social Development... 8 Stock Development...10 Investor Relations...10 Financial Statements

3 Relevant Issues and highlights after Q After one year of operations, the plant has produced over 200,000m 3 and the production continues steadily growing according to plan. During the Q the cash position increased in MxP 19MM, practically reaching operating cash flow break even. We successfully launched Tecnotabla s melamine portfolio in Mexico City and Guadalajara. The first sale of carbon credits was made. In July 2017, we disbursed the first USD 32MM from the credit that Proteak signed with IFC-PROPARCO in January 2017 to refinance current liabilities that the company had with Financiera Nacional de Desarrollo Agropecuario, Rural, Forestal y Pesquero and the IFC. MDF business unit Production Tecnotabla produced over 53,000m 3 during the Q2 2017, 5% more than the Q and 29% over Q After one year the producion ramp-up is running according to plan. During Q our production level continues as expected and all MDF thicknesses were produced. The plant continues expanding the manufacturing of value added products, and during the Q2 it produced excellent quality melamine boards. The Glue Plant is now integrated to the production process and as the ramp-up continues, glue costs will gradually decrease. As of June 2017 production tendencies are favorable, during the quarter daily production increased 10% and production waste decreased 1pp. These efficiencies reduced by 7% the unit cost of the quarter, improving the gross margin by 7pp compared to Q The reduction of board production unit cost continued through the quarter, even when the quarter results do not yet reflect completely the benefits of energy savings from the Turbin nor the expected savings in glue cost for the company s own production and the consumption efficiencies derived from the EvoJet. During the commissioning of the Turbine there were some technical problems present, that are currently under the suppliers evaluation. Each of these equipments continues under the warranty period and it is expected they will return to normal operation soon. Commercialization During the Q our product maintained good acceptance. Regarding sales, throughout the quarter we sold MxP 202MM, 2.2x over Q and 17% under Q This decrease is due to seasonality of the industry, with a 3

4 slowdown in the second quarter of the year, as well as an increase in the MDF board supply as a result of the additional production capacity in the country and the board imports, mainly from Brazil. Nevertheless, as of quarter-end, our brand Tecnotabla maintains an estimated market share in the MDF boards market of 20%, only a few percentage points behind the industry leader. Our commercial strategy regarding Tecnotabla is to have an active participation at the broad MDF board market, including value added products, so during the quarter we launched its melamin collection in Mexico City and Guadalajara. In addition, we continued to commercialize value-added products including Tecnotablas melamin portfolio. Market Share Tecnotabla Tecnotabla in Mexico Source: Proteak Analysis, ANAFATA, SIAVI Forestry During Q2 the 2017/2018 plantation campaign continued; this campaign considers 2,000 ha of Eucalyptus. With this, we will reach our goal for planted hectares of certified Eucalyptus to supply the MDF plant. Teak business unit In the short and medium term, no significant activities from our mature Teak plantations are expected due to its maturity. To maintain commercial presence in the Asian markets, Proteak started a market test of commercialization of mature Teak from third-parties. This will allow Proteak to continue developing the market and commercial expertise. 4

5 Results analysis MxP millions Q Q VAR B/(W) YTD17 YTD16 VAR B/(W) BOARD SALES Sales 201,678 93, , , , ,399 Other Income 12,015 26,898 (14,883) 17,470 28,743 (11,273) Revaluations of Biological Inventory 3,500 3, ,000 7,000 0 TOTAL INCOME 217, ,926 93, , , ,126 Cost of sales (186,579) (116,851) (69,728) (420,560) (148,858) (271,702) GROSS PROFIT 30,614 7,075 23,539 47,600 8,176 39,425 Gross Profit Margin 14% 6% 8% 10% 5% 5% VENTAS DE TECA Sales 13,556 19,375 (5,819) 29,078 47,076 (17,998) Other Income 2, ,039 2,039 (351) 2,390 Revaluations of Biological Inventory 21,435 32,728 (11,293) 43,679 74,847 (31,168) TOTAL INCOME 37,030 52,103 (15,073) 74, ,572 (46,776) Cost of sales (15,925) (17,804) 1,879 (33,784) (43,000) 9,216 GROSS PROFIT 21,105 34,299 (13,195) 41,012 78,572 (37,560) Gross Profit Margin 57% 66% (9)% 55% 65% (10)% Gastos de Operación Logistics and Sales Expenses (19,157) (5,701) (13,456) (38,967) (5,701) (33,266) Administration Expenses (49,084) (30,536) (18,548) (98,797) (56,897) (41,900) OPERATING INCOME (16,522) 5,137 (21,659) (49,152) 24,149 (73,301) Operating Margin (6)% 3% (9)% (9)% 9% (18)% Financial expenses, net (19,113) (18,159) (954) 139,777 (16,813) 156,590 PROFIT BEFORE INCOME TAXES (35,635) (13,022) (22,613) 90,625 7,336 83,289 Income taxes 10,647 (2,604) 13,251 (27,230) (1,467) (25,763) NET CONSOLIDATED PROFIT (24,988) (10,418) (14,570) 63,395 5,869 57,526 Sales I. Income Statement Analysis The quarter continues to reflect the transition from a company that spent 15 years building a solid balance sheet to an operating company. Sales of goods as of June 2017 totaled MxP 473MM, 181% over Q Quarter MDF sales reached a total of MxP 202MM, 2.2x over those registered during 2Q Sales decreased MxP 41MM compared to Q due to a lower volume in sales reflecting the seasonality of the industry and the growth of imported MDF supply. During the quarter Tecnotabla MDF board continued to have an excellent market acceptance. 5

6 Our board sales in United States increased 2.8x compared to Q1 2017, we are currently developing a commercialization and logistic strategy to reduce costs and improve profitability. In the second quarter of 2017, income from the reasonable value of the Biological Assets (revaluation) accrual totaled MxP 25MM, staying in line with historical growth rates. Throughout the year, the company makes income provisions from the Biological Asset Revaluation according to expected growths. Nevertheless, it is during the fourth quarter of the year when a physical inventory takes place and the final value of the year s revaluation is registered along with the corresponding adjustments. Net quarter revenue totalized MxP 254MM, a 44% growth over the same quarter last year. Cost of Goods Sold, General Expenses and Net Income During the quarter, a 14%, gross margin was achieved in our MDF BU, reflecting the leverage of the plant fixed costs with a higher level of production as well as the integration of the Glue Plant to the process. Processes to achieve optimal cost levels continue through the glue plant stabilization, the integration of the Turbine and the EvoJet glue application system, which will continue to support the progressive improvement of the operation margin. Teak costs mainly reflect operation fixed costs; however, we are optimizing the business structure to maintain its size in line with the operation. General expenses in the quarter totaled MxP 68MM, including MxP 19MM of MDF boards distribution expenses, which will continue to increase as MDF boards volume grows. Recurrent SG&A expenses are in line with the normal operation level of the company and reflect the employee stock plan, which are non-monetary items. 6

7 The Operating Loss of the quarter is MxP 17MM, MxP 16MM less than the one reported Q An EBITDA of MxP 30MM was registered during the quarter, 3x higher than the Q EBITDA. As of Q2 2016, the Company stopped capitalizing the financial cost related to the construction and start-up of the MDF plant. Therefore, there was an impact in the income statement of MxP 18MM during Q2 2017, primarily from AKA/Commerzbank credit interests. As of June 2017, the company reported an exchange rate profit of MxP 190MM which offsets the reported loss in the 2016 year-end figures. As mentioned, the company s FX exposure is balanced between the USD denominated and the Teak Biological Assets, whose functional currency is USD. The combination of these effects result in a net profit after tax for the period of MxP 25MM. II. Balance Sheet Analysis Assets As of June 2017, the total assets of the Company amounted to MxP 6,262MM, with a marginal decrease vs the Q and a 2% growth vs 2016 year-end, mainly driven by the capital increase effectuated in Q Inventory closed at MxP 202MM, reflecting an increase of 41MM compared to Q1 2017, mainly due to an inventory growth of MDF boards ready for sale ahead of Q Long Term Assets kept for sale includes mainly non-strategic land that will be sold in the medium term. These assets are in Costa Rica and their value as of this quarter is MXP 6MM; the decrease of MxP 77MM compared to year-end 2016 figures stems mainly to the sale of these assets that occurred in the Q1. 98% of these assets have been sold so far. Real Estate, Plant and Equipment totals MxP 3,250MM, showing a 43MM decrease compared to 2016 year-end figures, including the MDF Plant depreciation for the period. Biological Assets (Current and Non-Current) decreased 2% compared to March 2017, reflecting the Biological Assets revaluation during the period, which includes a mix of different effects, including new acquisitions, growth of existing plantations and exchange rate impact. 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. Specifically, the impacts are as follows: (i) MxP +63MM in capitalized forestry expenses for maintenance of existing plantations and preparation of new ones, with the purpose of improving their expected return by maintaining above average growth rates; (ii) MxP (31)MM reduction from strengthening of the MxP vs the USD during the quarter; (iii) MxP +25MM in revaluation from the previously discussed growth; and (iv) MxP (69)MM, from wood outflows to cost of sales. During the quarter, the volume of wood harvested was of 144,400m 3, including mature Eucalyptus and Teak, as well as thinnings. Liabilities and Equity Current Liabilities increased 6% compared to Q1 2017, mainly driven by suppliers and creditors which reflect the natural increase in working capital due to the production level. 7

8 Other interest-bearing liabilities decreased MxP 49MM vs Q1 2017, mainly because of the impact of the USD depreciation of the quarter, as of today over 70% of the interest-bearing liabilities are denominated in US dollars. Total Equity of the Company at the end of the quarter totals MXP 3,282MM, in line with Q and MxP 206MM higher than the 2016 year-end figure, reflecting the conversion effect as a result of the USD depreciation, the results of the exercise and the 16MM CPO s capital increase. As of today, the capital increase has been 100% subscribed and paid. Proteak continues with strong liquidity and with a solid Equity to Liabilities ratio of 1.1 to 1. III. Cash Flow Analysis During the Q2 2017, the cash Flow position recorded a net increase of MxP 19MM, the company is above the breakeven level even with the decrease in volume of MDF sales. Additionally, investment activities took place as well as forestry operations such as maintenance and establishment of new plantations. During the quarter, there were amortizations and interest payments related to the credits signed in 2010 with Financiera Rural (now Financiera Nacional de Desarrollo Agropecuario, Rural, Forestal y Pesquero, FND) for a total of MxP 11.4MM. Additionally, a payment for MxP 3.3MM corresponding to interests of the FND credit signed in 2015 was made. The period s cash Flow is in line with the Company s investment plan. As of Q the cash Flow position was MxP 414MM. Environmental and Social Development Regarding environmental development the annual FSC Audit for Forestry Management in Costa Rica s Teak plantations was positively concluded and the first sale of Fresh Breeze carbon credits was made. Proteak was present at the following events to support conservation, sustainable use of natural resources and Community well-being: The seminar on Business Opportunities in Sustainable Forest Management organized by SEMARNAT, CONAFOR y CESPEDES/AMEBIN; The panel on Responsible and Sustainable Investments under the PBSS Colloquium; As jury on the Certamen Joven Emprendedor Forestal organized by Reforestamos México. 8

9 Regarding social development, Proteak supported with construction material and backpacks to the Elementary school in Venustiano Carranza and a kindergarten in Las Choapas, benefiting a total of 75 students. Additionally, MDF boards were donated to the Casa de la Cultura in Emiliano Zapata, Tabasco and the Directorate of Environmental Protection of Cunduacan. KINDERGARDEN PIOLIN 10 CHILDREN FED FRANCISCO TRUJILLO GURRIA RURAL SCHOOL 65 CHILDREN 9

10 Stock Development During the second quarter of 2017, Teak CPO reached a maximum price of MxP During the quarter, the price of its CPO remained stable, with an average of MxP vs MxP during Q Teak CPO reached the highest volume of operation since its issuance in 2010: 10MM of CPOs. Investor Relations Independent Analyst As part of the independent analyst program, follow-up of Proteak s CPO is performed by: Ernesto Gustavo O Farrill Santoscoy eofarrills@bursametrica.com Tel: (55) Bahía de Todos los Santos #26 Col. Verónica Anzures Delegación Miguel Hidalgo C.P , México, D.F. Investor Relations Agency Alejandro Ramírez Arcia alejandro.ramirez@irconsulting.mx Tel: +52 (55)

11 Financial Statements The following table presents the consolidated Balance Sheet as of the second quarter 2017 in MXP 000, and its comparison with the first quarter 2017 and 2016 year-end figures. Balance Sheet Jun'17 Mar'17 Dec'16 (1) Δ Jun'17 vs Mar'17 % Δ Jun'17 vs Dec'16 Cash & Equivalents 414, , ,638 19,446 5% 254, % Accounts Receivable (Clients) 139, , ,738 (52,110) (27)% 9,454 7% Other Accounts Receivable 170, , ,561 19,280 13% 33,751 25% Inventory 201, , ,072 41,443 26% 48,617 32% Biological Inventory 208, , ,357 5,628 3% 8,792 4% Assets Available for Sale 5, ,764 82,581 (210) (4)% (77,027) (93)% Other Assets 8,572 12,572 8,761 (4,000) (32)% (189) (2)% CURRENT ASSETS 1,147,651 1,118, ,708 29,477 3% 277,943 32% Plant and Equipment 3,249,997 3,306,409 3,292,555 (56,412) (2)% (42,558) (1)% Biological Assets, mature and inmature 1,649,402 1,685,556 1,770,729 (36,154) (2)% (121,327) (7)% Deferred Income Tax 13,214 13,475 14,226 (261) (2)% (1,012) (7)% Other 138, , ,847 4,010 3% 2,812 2% Prepaid Expenses 62,954 40,802 38,514 22,152 54% 24,440 63% NON-CURRENT ASSETS 5,114,226 5,180,891 5,251,871 (66,665) (1)% (137,645) (3)% ASSETS 6,261,877 6,299,065 6,121,579 (37,188) (1)% 140,298 2% Accounts Payable 168, ,466 87,607 33,286 25% 81,146 93% Payable Taxes 1,577 2,203 11,789 (626) (28)% (10,212) (87)% Other Current Liabilities 381, , ,226 2,634 1% 38,890 11% Current Debt 137, , ,724 4,092 3% 34,967 34% CURRENT LIABILITIES 689, , ,346 39,386 6% 144,791 27% Long Term Debt 1,656,327 1,710,251 1,895,095 (53,924) (3)% (238,768) (13)% Deferred Taxes 628, , ,792 (10,689) (2)% 27,188 5% Other 5,679 4,700 4, % 1,193 27% LONG TERM LIABILITIES 2,290,986 2,354,620 2,501,372 (63,634) (3)% (210,386) (8)% LIABILITIES 2,980,122 3,004,370 3,045,718 (24,248) (1)% (65,596) (2)% Capital Stock 2,741,101 2,689,363 2,346,222 51,738 2% 394,879 17% Accumulated Earnings (Losses) (233,578) (191,040) (264,667) (42,538) 22% 31,089 (12)% Conversion Effect 430, , ,326 (39,701) (8)% (219,260) (34)% Revaluation Surplus 195, , ,790-0% - 0% Other Comprehensive Income 148, , ,190 17,561 13% (814) (1)% TOTAL EQUITY 3,281,755 3,294,695 3,075,861 (12,940) (0)% 205,894 7% TOTAL LIABILITIES + EQUITY 6,261,877 6,299,065 6,121,579 (37,188) (1)% 140,298 2% (1) 2016 Audited Financial Statements % July 28, Mexico City. Today, Proteak Uno, S.A.B de C.V. (BMV: TEAK) published its Q results. This information is presented according to Financial Reporting Standards (NIF) in nominal terms. 11