3q07 presentation
TRANSCRIPT
3Q07 ResultsNovember 14, 2007
HighlightsSales volume increased 7.9% in the 3Q07 compared to the 2Q07;
Gross Revenue was R$ 124.6 million, a 5.6% growth over the 2Q07;
Net Revenue was R$ 113.3 million, 5.3% higher than in the 2Q07 (R$ 107.6 million);
COGS per unit declined by 2.1% compared to the 2Q07;
Adjusted EBITDA reached R$ 27.7 million in the quarter, an increase of 5.6% compared to the 2Q07.
EBITDA margin was 24.5%, practically the same as in the previous quarter. Consolidated EBITDA (with
Isofilme) reached R$ 28.5 million;
Adjusted Net Income stood at R$ 12.2 million, reversing the loss posted in the 2Q07;
IPO concluded in July, raising a net amount of R$ 451 million;
Acquisition of Isofilme concluded;
Closure of operations in the flexible packaging division.
12.7
6.9
0.7 0.2
12.1
5.6
0.4
12.6
5.0
0.6 0.2
13.1
5.7
0.5 0.4
3Q06 1Q07 2Q07 3Q07
Sales Volume (tonnes thd)
Nonwoven Tubes and Connections Packaging Others
Sales Volume
The Company recovers sales volumes in its core businesses.
4% growth in the nonwovens segment.
14% growth in the PVC segment, including the recovery relating to the 2Q07, when there was unscheduled maintenance.
Packaging segment showed slight decrease in volume reflecting the slowdown on account of the closing down of its activities.
Gross Revenue
5.6% revenue growth between the 2Q07 and the 3Q07.
In the external market, revenues grew 6.9%, mainly due to the increase in sales volume, because prices fell due to the strengthening of the Brazilian Real against the dollar.
In the internal market, gross profit increased 4.9% also due to the growth in sales volume, especially in the tubes and connections segment.
3Q06 1Q07 2Q07 3Q07
98.579.8 81.1 85.1
41.541.8 36.9 39.5
Gross Revenue(R$ million)
Foreign Market Domestic Market
140.0121.6 118.0 124.6
Cost of Goods Sold (COGS)
The unit cost of goods sold declined 2.1% in comparison with the previous quarter.
Stronger Real compensated for the pressure on resin prices.
3Q06 1Q07 2Q07 3Q07
88.2
81.9 79.1
83.7
Cost of Goods Sold (R$ million)
Operating (Expenses) RevenuesSelling expenses: 18.2% increase over the
previous quarter, mainly due to the increase in freight on account of higher sales volume and provision for doubtful accounts.
Administrative expenses: excluding the non-recurring expenses of the 3Q07 (IPO expense of R$20.1 million) and of the 2Q07 (acquisition process of R$ 2.6 million), administrative expenses declined 17.6% in comparison with the 2Q07.
Depreciation and Amortization: increase is due to reversal (credit) in the goodwill amortization in the 2Q07 because of the change in the amortization period from 5 to 10 years.
Other operating expenses/revenues: result of Isofilme according to the equity method was R$ 4 million..
3Q06 1Q07 2Q07 3Q07
Operating (Expenses) Revenues (R$ million)
(1.6)(5.7) (2.5) (5.6)
4.7 7.8 2.0 5.8
8.1 6.3 12.8 28.5
6.0 7.5
6.5 7.7
18.7 36.317.1 15.9
Sales Expenses Administrative Expenses
Depreciation and Amortization Other Operating Revenues
(5.7)
7.8
6.3
7.5
(1.6)4.7
8.1
6.0
3Q06 1Q07 2Q07 3Q07
32.1
23.926.3 27.7
Adjusted EBITDA (R$ million) and EBITDA Margin (%)
25.4%
21.7%
24.4% 24.5%
Adjusted EBITDA Margin
Adjusted EBITDA was R$27.7 million, with growth of 5.6% in relation to the 2Q07. Including Isofilme, adjusted EBITDA reached R$ 28.5 million
EBITDA margin remained stable at 24.5%, reflecting the fall in selling prices in Reais.
We estimate our EBITDA “loss” in the 3Q07 at R$ 2.7 million, due to the impact of the weakening Dollar on prices in the external and internal markets.
Non recurring expenses which influencedEBITDA in 3Q07:
IPO expenses: R$ 20.1 millionInventory adjustment: R$ 2.7 millionAcquisition of Isofilme and discontinuity of
transporter and flexible packaging division: R$ 2.9 million
EBITDA and EBITDA Margin
Net Income and Net Margin
Adjusted Net income in the 3Q07 was R$ 12.2 million, reversing the negative result of the 2Q07. Net margin was 10.8%
This positive result reflects the improvements in the operations and Company’s new cash position after the IPO.
3Q06 1Q07 2Q07 3Q07
21.9
2.4-3.8
12.2
Adjusted Net Income (R$ million) and Net Margin (%)
17.4%
2.3%-3.6%
10.8%
Net Margin Adjusted
Consolidated Debt
Composition of Net Debt
Total Debt
Short-Term
Long-Term
Total
Cash and Commercial Markeable Securities
Net Debt
(R$ million) 09/30/07
283.2
109.7
392.3
210.5
182.4
499.6
30.7
530.3
57.8
472.5
(1) Adjusted EBITDA in the quarter + EBITDA of Isofilme, annualized.
06/30/07
Net Debt / EBITDA (1) 1.6X 4.5X
Debt (cont.)
Providencia intends to continue its strategy of profile extension and debt cost reduction. Next stages:
1) Elimination of Isofilme’s short-term debt of approximately R$ 25 million, through capitalinjection;
2) Redemption of Eurobond in the value of $10 million issued by Isofilme at a cost of US$ + 9% per year;
3) Conclusion of redemption of the promissory notes (approximately R$ 250 million) used to finance the Company acquisition;
4) The funds required for these operations and to rebuild Company’s cash position will be raised through a debenture issue and/or long-term bank loan.
1) KAMI 9 Project• Construction concluded and machinery deployed within schedule;• Operations start in January 2008;• Investments within the budget.
2) Nonwovens – Laminates• Sales as per plans. Full production capacity in the 4Q07.
3) Nonwovens – Medical Disposables• Product planning and development already started;• Executive with vast experience in the segment hired;• Sales expected to commence in the 1H08.
4) ISOFILME• Acquisition completed;• Sales, controllership and finance departments already integrated;• Investment s to streamline operations in order to attain fullproduction capacity will be concluded by year-end.
Operational Highlights
Operational Highlights (Cont.)
5) Flexible Packaging Segment• Operations closed on September 30;• Sale of equipment and installation should be concluded by year-end.
6) SAP Project• Project officially started in August;• Conclusion by the end of 1Q08.
7) PVC Tubes and Connections Division• Recruitment of a General Manager with vast experience in this segment;• New connection molds received according to schedule in order to increase
capacity;• Schedule for installation of extruder for large diameters is on as planned, will start
operating in the 4Q07.
The words “believe”, “anticipate”, “expect”, “estimate”, “will”, “plan”, “may”, “intend”, “foresee”, “project”, and other similar expressions, are intended to indicate forward-looking statements. Such forward-looking statements involve uncertainties, risks and assumptions, since they include information related to our possible or presumed future operating results, business strategy, financing plans, competitive position in the market, industry environment, potential growth opportunities and the effects of future regulations and competition. In addition, forward-looking statements refer only to the date on which they were made and should not be taken as a guarantee of future performance. Providência is under no obligation to update this presentation with new information and/or future events .
IR ContactRubens SardenbergIR OfficerTel.: 55 (41) 3381-7600 Fax: 55 (41) 3283-5909São José dos Pinhais – [email protected]/ri