Ouro Fino Saúde Animal Participações S.A. (OFSA3) Earnings Call Transcript & Summary

Good morning for everyone. Very welcome to be here with us, promoted by Ouro Fino Saúde Animal to share our results for the second semester 2022 and accumulate first semester. I'm Juliana Matthes. I'm part of Corporative Communication, Ourofino. It's a pleasure to be here to conduct this event. This presentation brings the statements and will be available at our site, IR; ri.ourofino.com. At the end of the presentation, we will have Q&A. And if anyone wants to make a question, please write to us with your name and institution, and we will reply to you, okay. I will read [Indiscernible] -- this presentation brings statements among future events that are subject to risks and uncertainties. Such statements are based and are managed beliefs and assumptions and on information that the company currently has access to. The statements about future events include information regarding our intentions, beliefs, our current expectations, as well as those members of the Management Board and Company Directors. Disclaimer is according to the statements and information about the future assumptions including information about possible or present operations, as well as statements preceded by, followed by or including words believes, may, will, continue, expects, anticipates, intends, plans, estimates or similar expressions. These statements and information are not guarantees of future performance. They involve risks, uncertainties and assumptions because they are related to the future events and therefore, depend on the circumstances that may or may not occur. Future reasons and value creations for our shareholders may differ materially from those expressed or implied by the statements made about the future. Many of the factors that will determine these results and values are behind our ability to control or predict. With those presentations, we have Kleber who is our CEO; and Marcelo Silva, the Financial Director and RI -- and we have Angelo Melo, our Development Director for new business, to continue as the word of the Kleber. Kleber we welcome.

Good morning, Ju. Good morning everyone. It's a big pleasure to be here to share our results for the second semester and accumulated semester. I want to start talking about institutional issues. It's a big pleasure that we completed 35 years of history, a very good history, successful history from a company starts -- or a dream. And it's a big country -- the biggest Brazilian company with very capacity to relationship with our clients, a company very technological basis with very good work internally. And we are very happy to be here and our employers are very happy to -- should be at this moment. And I want to thank you for our workers as a part of our history, and they are here with us until today, help us to be here at this moment, I'm very happy about this. And talking about this moment. We are very happy to because we are elected the best company to work at the [Indiscernible] in Business in Brazil from GPTW. It is the first company, #1 company. And we know that there are another good companies too, but we are the best, and we are very happy because of this. We received a certificate from [Indiscernible] with a very good position to work and made compare with another companies about this qualification in here. We are 5 or 6 points above and it's a very good classification, and we know that we have a good future based on your work, on culture, but mainly to account on the people, because the people is amazing here. We are very happy to because we had some launch of digital platforms to be more -- need for clients. We are very happy because our clients always remember us. They say that we are not a company only of business, but we are very near from this client side by side. And we launched iUse Saber, is a platform for knowledge. And we know that our markets have a very good space for knowledge to bring more technologies, to reimagine the animal health because we are wanting to have the leadership of these sectors. IUse Saber is totally free for clients, for employers -- for employers, for doctors, but even if -- even for everyone wants to have some knowledge. We are very happy to because in the last week, we made some launches of new products, Tulaxx. It's antimicrobial for the very advanced in generation using swine and bovines, is a post-patent product and leadership of market. And is the first company to have this product. And this will help us with our research. We have the launches of the supplement for companion animals. We have some supplements like this that are aligned. But these supplements, Angelo will say more about this, but has a very good credit because help the treatments of medicines for the animal -- companions, for example, for the heart disease for animal -- companions, and we will continue launching new products. We had a good expectative for new products at the second semester. Talking about the company, we are very aligned. Financial structure is very nice. Marcelo will talk about this. We are less leverage -- financial leverage. We have some points to talk, myself will explain, but we will have now a very good company, a stricter company. We have advantages points regarding our other companies. In general, we are very prepared financial -- financially prepared, show continued growth and strong growth. Talking about the trimester and the first semester saying by about market point. We had a master positive semester, growing very strong, but the second semester was not so good because we had a little bit less growth. But looking at the year complex, we imagine this because -- we can say that this is for the uncertainties -- economic uncertainties that the companies are leaving, the political uncertainties. We are very -- take care about these. We understand that agri business is best for this. And -- but we have a strong company. We had some adjustments this semester. We promoted some change of the distributors of companion animals that will bring with a very strong exhibits. It's common issues at our markets. We always have a release, but we saw the second semester like a positive way. Talking about production animals, we saw the exportation of meat in a good point, a good way, talking about Asia in China. We know that this will continue. We know some animals different from the last 2 years, but we saw the economic point going well. We will simulate the internal consumption. We have some second semester, for example, some fares [Indiscernible] we believe the second semester will be very positive to bring the results more aligned for -- that we believe. At companion animals, we leave very good 2 years. The people want to stay at home and are buying more things for the house, for the animals, companion animals -- and now the people are going to the other place, buying other things. But we know that this market will be strong for more years. We believe that's not like the 2 last years, but we believe that will continue the next year's continued growth. We know some launches to make for company animals. We launched some products, but we will launch more. And we saw this like a positive point for the second semester. International operation, we're doing well, but the exchange rates reduced a little bit our margin, but we get some good points regarding our logistic issues because these points are very difficult as we know, but this is not a problem for us. Talking in general terms, we are -- with a good positive questions, as Marcelo will talk with you in some minutes. But we believe to make this area very positive at the end of this year -- and to the end of this year. We are hard work at our business, our clients, our portfolios and our growth drivers and our strategic planner, a very [Indiscernible] us a very good future. So I want to thank you for everyone -- and I will return at the Q&A questions. Okay.

Thank you, Kleber, for your participation. As we talked before, we will have the Q&A section. We have some questions at our chat. So we reply as -- at the end of the event and we have our President, Angelo Melo. He's our Director for Strategic Development and New Business, to talk more about our portfolio. Welcome Angelo. It's a pleasure to have you here.

Good morning, Juliana, and good morning to everyone. It's a pleasure to be here at our communications or presence. We have some news and very good news to our clients because they are our reason to be here. As Kleber talked before, we have a launch at the end of this month. Tulaxx is a product for starting, is the second of the market, and we will bring a very good alternative for our doctors for bovine and swine. This is respiratory product, very aligned of the only [Indiscernible] is a very good alternative to have more better cost for doctors. It is a very good market, strong with a strong growth. Talking about the technology or the bovine products are using -- and in the market for bovine -- for doctors are growing, very hard when we saw the new technologies that they are applying. And we believe that this is very good for our markets and for revenue. We will have supplement lines. We will launch this -- is a 5 supplements this month, we will launch more to the end of the year. The supplement markets are always growing. It's twice large than when we saw the market medium. And supplements is twice more when we saw the companion animals. It's very aligned with the [Indiscernible] for the companion animal immunization, because the doctors made this with your pets, your companion animals. The same thing that we may offer kids. And this is -- we saw this growing at this market is very strong -- a very strong growth. We had a lot of opportunities. We have 2 good players, national players and a lot of small companies, regional companies, but Ourofino wants to be a company -- a strong company to contribute for the marketing growth -- this market growth, using introduction of more sophisticated products to obtain the specifical necessities from the tutors. We are a health company, and we will bring our experience at the health company for this market -- for example, we had a supplement for heart -- our heart companion animals to supply these animals who have this disease. We have some for old -- older animals. So we have a lot of launches, is a complete line. Until December, we will know -- we will show you more launches. Good morning for everyone. I am available to questions for everyone.

Thank you, Angelo, for your participation. Now Marcelo Da Silva will present our results. Good morning, Marcelo. It's your time to say, please?

Hello, Juliana. Good morning for everyone. I want to talk about our results for the second semester. Let me talk a little bit about our challenges for the year, but we had a good expected continued growth in the next month regarding our financial conditions and launch of new products. We got a good growth, 9.5% of generation cash, very relevant, and [indiscernible] we have good health to continue to grow, made investments in innovation. I will pass for results of -- consolidated results. Above trimester is 1.9 regarding the last semesters. We have 36.5% of growth and accumulated of 6 months, 1.9%. We accumulated growth in 53.8%. And results of trimester not reflects or points of the company because our obviously it continues to grow. As soon as we made the last 2 years, an important point is even this scenario less favorable regarding logistic supply chain or inflation of the country. We have preserved the gross margin. Regarding the semester -- the last semester that reflects our strategy to repair the cost, the price of the products and not going to the market like a predatory manner. We have exchange rates impact, because bring us a less gain, but we will be more clear in the next glide. Production animals represent 17% of our business. We have relevance growing. We grew 52% and accumulate grew 8.9%, and we'll compare 2022 at the same time. And we have the semester [indiscernible] so basically, 12 million of those, can change this, but we have some concentrations of more at June -- after the last week of June. And we have good news because of launch of the Tulaxx that Angelo talked before. But we -- and we will look at the future of the production animals. We have some sales, I have talked about some sales and the marketing are favorable to exportation. So we know that we can be very good at the -- each of the end of the year. Talking about the gross margin, is 42.2% or 44% in 2021 when we compare. And we compare this semester is a little bit better now, and continue the list -- compared to the last semester of the last year. Talking about the companion animals, we have the companion animals a little bit more, not so good semester when you compare at the same period than last year, but continue growing when you compare, and we shall grow relevant growth comparing the 2 semesters [Indiscernible] 6% at the companion animals. In this semester, we lost the opportunity -- the additional products just because we have some difficulties at the [Indiscernible] in Brazil [indiscernible] -- as Kleber say, we have some adjustment, but we will return it with this semester like our organized way. We have opportunity to grow the sales, launch of new products and capturing good positive results regarding this adjustment. The gross margin growing is 70% against the last year, the last month has some fixed costs, but the tendency is to return at the next semester. As of international operations, we continue to advance our strategy to spend more at Ouro Fino and [Indiscernible] proposed should be the most admired the company -- best company in the Latin America. And we compare this semester in the last year, even if the dollar less favorable when you compare with the last year -- and we have the digitalization impact the gross margin. This loss margin that we had is about this point, this issues, the dollar more depreciated, dollar with real, when we compare the same period the last year. About some expenses. EB scenario -- challenging scenario like a costs, inflation and -- we have some -- we keep an SG&A and 9% when we compare the net revenue. The revenue has a little bit less growth. And our working is continue to grow less than inflation. The growth will be less than the period and intends to continue to last SG&A for the next semesters. We have scheduled at the development and research is a long-term work 5, 6 or 7 years and a very strategic. So even care with this point is to continue our relevant scale with research and development, we have with research and we've advanced projects at this visit partner. As apparent, in which adjusted EBITDA was 15% less than the same period last year. In the semester, it was 2.5% when you compare with semester in '21, the company are working so hard to continue growing EBITDA more than [Indiscernible] revenue. The work to keep the company with a health -- a good health, is dynamic to make a schedule investment. We are generation -- operational cash -- everyone has an account company us. We are keeping a very good point. We are -- we need to increase our stocks, considering we had a scenario like difficult imports from China, even with our international logistic issues. Generation of cash will be more a little behind, but we make relevant when we compare like the last year. Showing our capital structure, as we cannot control the taxes, we are working hard to making the -- our capital structure with a less leverage CDI -- and this is the decade of our or point out grow. We are keeping our schedule through investment in the development and research. And we have a long term in cost to keep this schedule like a relevant timing and continued time. And then [Indiscernible] 2020 and 2021, we had some difference, and we grow the [Indiscernible] participation from 46% to 60%. And this is to continue to grow at the next semester because we are robust to generation cash and ratio -- and some accumulated credits, like in taxes. We are very comfortable to have at the end, BRL 4 million of [Indiscernible] 13.6% of difference -- the leverage is very adequate. And the besides this composition -- very favorable compositions, 8% of [Indiscernible] is long term, and we saw the payments for 5 years. The most of them considerable for 5 years with a less cash pressure or necessary to renegotiation of this indefinite, in this scenario with a lot of taxes and political issues in Brazil. And about the investments in research and development -- in this semester, it's 8.2% of the net revenue. We grew in the all the years, these investments, but this is the future of the company and the decisions to make investment in projects to make a better effect in the next years. So thank you for the opportunity to talk about the results. And I'm available through Q&A.

Thank you, Marcelo. So we are hoping for Q&A. You can write in Q&A, your question because we will reply. We have some questions. And in our chat, I will pass to Kleber to conduct this moment. Kleber?

Ju, thank you. I will ask first, the question to Angelo. How we saw the margin for the year and the leverage? How will the maximum leverage that the company wants to be and has some problem to contract people?

Thank you, Carlos, for the question. The dynamic of margins are very -- has challenges for us. But I bring it here, we are gaining margins at the business lines and production animals. The 7% of revenue. We are -- we sold our products at the price. Companion animals is a good margin around 7%. We have some pressure sometimes for the last well, but the tendency is -- this in an operational international, is a little bit more less for the companion animals, but both of the production animal can be imported by the exchange rates. But get 60%. Like a cost of the raw material, we have a [Indiscernible] China. We always -- saw the prices, we are not seeing as 2022 costs, both from 2021, for example, where we pass our prices is very aligned where it wants to be -- it's a very challenging scenario, but we are working to keep the health of the company. Regarding leverage, we don't have a maximum point to define it as once we want to be. Our leverage is very aligning to our strategic point and to have organically growth, we have a fund -- strategic fund to contractor to have a scheduled innovation. And we talked with you because company is not limited at only organic strategic because we are some strategic like acquisition of companies, like synergic companies and products to -- and in situation like this, we can make a capitation to have a good leverage, but always not like a conservatory way, but adequate from Brazil. And we don't have idea to have leverage [indiscernible], talking about inorganic acquisition.