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Results Presentation 3Q08

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  • 1. 3Q08 Results November 13, 2008
  • 2. Agenda • 3Q08 Operational/ Administrative Highlights • 3Q08 Results • Outlook 2
  • 3. Operational and Administrative Highlights  Sell of the Pipes and Fittings division - Provinil:  Focus in the nonwovens: our core business, presenting margins of 23.6% versus 9.6% of the Pipes and Fittings Division;  Share Purchase Agreement signed with Aliaxis on September 18, 2008;  R$82 million, equivalent to 7.5x the Ebitda generated in the last 12 months;  Deal expected to be closed during the 4Q08. 3
  • 4. Operational and Administrative Highlights  Debentures issued on December/2007:  Rating annual review;  Rating maintained at a brA level, despite the world crisis;  Síntese Analítica released by Standard & Poor’s on October 28,2008. 4
  • 5. Operational and Administrative Highlights  Specialty hygienic and medical: 2,084 1,923  Investments in progress in laminated 1,671 and printed hygienic disposable production lines, at full capacity at the 1Q09. 19%  Laminated and printed will account for 17% 16% up to 18% of our production capacity. 3Q07 2Q08 3Q08  We started on 3Q08 the sales of high Volume PMU performance medical disposables, made at KAMI9, reaching 145 tons in the quarter. Volume, in tons, of laminated, printed and medical disposables Price premium of specialties versus commodity disposables 5
  • 6. Operational and Administrative Highlights  Others:  Conclusion of the Share Buyback Program, totaling 3.1 million shares, in August/ 2008. The total cost was R$ 22.3 million, and the average price was R$ 7.09/share;  Implementation (go live) of SAP system on July 1st, 2008. 6
  • 7. Agenda • 3Q08 Operational/ Administrative Highlights • 3Q08 Results • Outlook 7
  • 8. Sales Volume Sales Volume (thousand tons)  Increase of 28.8% in relation to 0.5 0.8 the 3Q07 mainly due to the 0.6 5.7 5.9 0.5 nonwovens division that growth 28.5% in the same comparison 5.7 because of Isofilme volume that started from the 3Q07, and begin of KAMI9 operations last April; 17.9 17.7 13.8  In relation to the previous quarter there was a 200 tons decrease in nonwovens due to shipment delays caused by SAP go live. 3Q07 2Q08 3Q08 Others Packaging Pipes and Fittings Nonwovens In thousand tons 8
  • 9. Gross Revenues Gross Revenue  Increase of 16.6% in relation to 153.0 the 3Q07, and of 2.7% comparing 149.1 to the 2Q08; 131.3 45.5 48.7  In the export market our 39.5 revenues increased 23.5% in relation to the 3Q07 and 7.1% in relation to the 2Q08, even with the appreciation of the real against the 103.6 104.3 dollar; 91.8  In the domestic market our gross revenues increased 13.6% in relation to the 3Q07 and 0.7% 3Q07 2Q08 3Q08 comparing to the 2Q08, also due Domestic Market Export Market to shipment delays caused by SAP In thousand Reais go live. 9
  • 10. EBITDA (R$ million) and EBITDA Margin (%) Adjusted Ebitda (R$ million) and Ebitda Margin (Hedge) (%) 0.5  Adjusted EBITDA reached R$ 26.4 1.1 million (20.1% margin), 7.7% less than in the 3Q07; 0.7 30.9  EBITDA adjusted by operational 28.6 hedge* totaled R$ 27.1 million (20.7% 26.4 margin), 8.8% bellow the same period 26.5% in 2007; 24.6% 25.5% 24.2%  In relation to the 2Q08 there was a 20.7% decrease of 14.6% due to smaller volumes because of the SAP go live 20.1% and because of the increase in raw 3Q07 2Q08 3Q08 material prices. Operational Hedge Adjusted Ebitda Adjusted Ebitda Margin % Adjusted Ebitda Margin (Hedge) % Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivables from the export market. 10
  • 11. Net Result (R$ million) and Net Margin (%) Net Income (R$ million) and Net Income Margin (%) 13.8  Our net result was negative in R$ 2.2 million with negative net margin of 1.7% due to a 10.8% negative financial result of R$ 16.4 millions, mainly due to -2.2% -1.7% variations in the exchange rates regarding our debt of R$ 20.4 millions, without cash (2.2) effect. (2.5) 3Q07 2Q08 3Q08 Net Margin 11
  • 12. Nonwovens Division Volume  Volume reached 17,700 tons, 28.5% (thousand tonnes) above the 3Q07. In the domestic market 17.9 17.7 the increase was 42.9% (mainly Isofilme) comparing to the 3Q07, and in the export 13.8 market it was at around 30.8% due to KAMI9;  Comparing to the 2Q08 there was a decrease of 1.1%. 3Q07 2Q08 3Q08 Net Revenue (R$ million) 103.7 104.9 85.5  Net revenues of R$ 104.9 millions, 22.7% above the 3Q07 and 1.2% above the 2Q08  The increase in the 3Q08 in relation to the 2Q08 was due to a 2.3% increase in the average price of sales. 3Q07 2Q08 3Q08 12
  • 13. Nonwovens Division Fixed Costs (R$ million) Unitary fixed cost 22.7% lower than in 10.1 the 3Q07;  In relation to the 2Q08 there was a decrease of 10.5% due to efficiency and scale gains. 9.1 9.0 0.66 0.57 0.51 Unitary Variable Costs (R$ - raw material, comissions and shipping) 3Q07 2Q08 3Q08 4.06 3.82 Unitary Fixed Costs 3.66  There was an increase of 6.4% in relation to the 3Q07, and of 10.9% in relation to the 2Q08 due to the increase in raw-material prices. 13 3Q07 2Q08 3Q08
  • 14. Nonwovens Division  Ebitda of R$ 24.0 millions, with 22.9% margin, Ebita (R$ million) and Ebitda Margin 0.4% above the 3Q07; 27.9  In relation to the 2Q08 there was a decrease 23.9 24.0 of 14.0% due to the increase in variable costs. 28.0% Ajusted Ebitda (Hedge) 26.9% 22.9% (R$ million) 28.4 3Q07 2Q08 3Q08 Ebitda Margin% 25.0 24.8  Ebitda adjusted by operational hedge* 29.2% 27.4% 23.6% was R$ 24.8 millions (23.6% margin), 0.8% bellow the 3Q07. 3Q07 2Q08 3Q08 Ajusted Ebitda Margin (Hedge) % 14 Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
  • 15. Pipes and Fittings Division Volume (thousand tonnes)  The volume was 5,900 tons in the 3Q08, 3.5% higher than in the 2Q08 and in the 5.7 5.7 5.9 3Q07. Net Revenue (R$ million) 24.3 22.8 3Q07 2Q08 3Q08 21.8  Net revenues of R$ 24.3 millions, an increase of 11.3% in relation to the 3Q07 and of 6.6% in relation to the 2Q08.  In relation to the 2Q08 the unitary average price was 3.0% higher. 3Q07 2Q08 3Q08 15
  • 16. Pipes and Fittings Division Fixed Costs and Unitary Costs Decrease in fixed costs of 12.0% in relation (R$ million) to the 3Q07; 3.2  Comparing to the 2Q08 there was a 17.3% 3.0 decrease. 2.7 0.52 0.55 0.46 Unitary Variable Costs (R$ - raw material, comissions and shipping) 3.24 3Q07 2Q08 3Q08 2.92 2.66 Unitary Fixed Costs  Increase of 21.7% in relation to the 3Q07 and of 11.0% in relation to the 2Q08;  There was a price increase in raw- 3Q07 2Q08 3Q08 materials in relation to the 2Q08. 16
  • 17. Pipes and Fittings Division Ebitda (R$ million) and Ebitda Margin (%) 3.6  EBITDA of R$ 2.3 millions, 2.9 with a 9.6% margin, a decrease 2.3 of 35.9% in relation to the 3Q07 and of 21.2% in relation to the 16.6% 2Q08. 12.9% 9.6% 3Q07 2Q08 3Q08 Ebitda Margin % 17
  • 18. Debt Consolidated Net Debt (R$ Million) 06/30/08 09/30/08 Total Debt Short term 6.7 18.0 Long term 377.7 441.6 Total 384.4 459.6 175.5 170.6 Cash and equivalents 208.9 289.0 Net debt
  • 19. Debt  The increase in the net debt was mainly due to financings and loans at an amount of R$ 48.0 millions, and to interests and restatements.  In the quarter we accounted for R$43.9 million in financial expenses, 96% without cash outlay. Currency variation represented R$20.4 million in our financial result, due to the 20% impact on our debt from the depreciation of the real against the dollar. On September 30, 2008 we had two interest swap agreements, due to loans and financing, one CDI vs. US$ totaling US$20 million maturing in December 2012 and another fixed rate Libor vs. Libor totaling US$50,000 maturing in June 2013, as well as US$22,000 in currency hedge operations. As a result, third-quarter net income was a negative R$2.2 million.
  • 20. Agenda • 3Q08 Operational/ Administrative Highlights • 3Q08 Results • Outlook 20
  • 21. Outlook  Increase in the production capacity of specialty hygienic disposables, from 700 tons/month in the 3Q08 to 1,200 tons/month when the investments are concluded and operational in the first quarter 2009;  Development and expansion of the production of high performance medical disposable, with higher added-value, to reach 300 tons/month in 2009;  Focus in the operations through stabilizing SAP;  Drawback verde e amarelo to acquire raw-material in products for export. 21
  • 22. CFO: Eduardo Feldmann Costa IR Manager: Gabriela Las Casas Phone: +55 (41) 3381-7600 Fax: +55 (41) 3283-5909 São José dos Pinhais – PR - Brazil www.providencia.com.br/ir The words “believe”, “anticipate”, “expect”, “estimate”, “will”, “plan”, “may”, “intend”, “foresee”, “project” and other similar expressions indicate forward-looking statements. These forward-looking statements involve uncertainties, risks and assumptions, since they include information related to our potential or assumed 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 22 presentation with new information and/or future events .