Confcall earnings release presentation 2 q 1011

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Confcall earnings release presentation 2 q 1011

  1. 1. Tereos Internacional Second Quarter 2010/11 Results São Paulo - November 17, 2010
  2. 2. Highlights Q2 2010/11 Financial Results Operating Segment Review Outlook and Summary
  3. 3. Successful integration of recent acquisitions • Operating the largest integrated cluster in São Paulo state after Mandu and Vertente acquisitions • Sole producer in La Réunion following GQF acquisition Recent operational achievements • Optimization of starch plants: stable volumes in Syral after closure of Greenwich plant Tereos Internacional - Strategic Highlights 3 • Optimization of starch plants: stable volumes in Syral after closure of Greenwich plant • Increased sugar production capacity in Brazil: successful start-up of Tanabi’s sugar factory and expansion in São José and Cruz Alta plants • Start-up of Andrade’s cogeneration facility Tereos Internacional is well positioned to address a new industry landscape and implement our long-term growth strategy
  4. 4. Tereos Internacional - Q2 Financial Highlights Solid revenue growth: R$1.5 billion • Year-on-Year: + 12.5% (+ 26.7% at constant currency) Adjusted EBITDA* : R$286 million • Year-on-Year: + 44.3% (+ 70.1% at constant currency) Sugarcane 4 • Strong revenue growth: R$744 million (+ 82.5% year-on-year) driven by acquisitions, higher sugar production and favorable market conditions • Guarani Adjusted EBITDA margin up to 30.9% from 11.5% improved by organic growth and acquisitions Cereal • Stable revenue: R$751 million (+ 1.6% vs. Q1 2010/11), despite closure of Greenwich site • Syral Adjusted EBITDA margin down to 9.5% from 16.2% impacted by higher cost of goods sold * Adjusted EBITDA : EBITDA excluding non recurring items, accounting effect of the adjustment in the fair value of the biological assets and financial instruments
  5. 5. Q2 Market Highlights Sugar Raw sugar prices (NY#11) increased by 40% in the quarter ended September 30, 2010, driven by lower than expected production and strong demand on low world stocks Brazil: yields to be affected by dry weather Starch Wheat prices increased by 52% in the quarter ended September 30, 2010, driven by 5 Wheat prices increased by 52% in the quarter ended September 30, 2010, driven by drought and fires that struck the Black Sea countries Starch & Sweeteners: next negotiation season (Q3/Q4) to reflect increase in cereal and energy prices, as well as sustained demand and tight spare capacity in Europe Ethanol Ethanol prices rose (US: + 27% - Brazil: + 24% for hydrous - EU: + 28%) due to tight supply-demand balance
  6. 6. Q2 2010/11 Financial Results
  7. 7. 591 741 116 18 15 355 613 35 Revenues - Q2 In R$ MM 1,498+12.5% 1,332 1,332 (149) 1,498 Brazil La Réunion Mozambique Starch Europe Ethanol Europe Solid growth in Revenues, driven by acquisitions, higher sugar production and favorable market conditions + 240 + 74 Q2 2009/10 Q2 2010/11 7 20 160183 Q2 2009/10 Currency Volume Price & Mix Q2 2010/11 Total Holdings Sugarcane • Brazil: +73% mainly due to the contribution of Mandu and Vertente, increase in sugar production (+ 83%) and higher prices • La Réunion: contribution of GQF that doubled the revenues, return to normal operating conditions in Bois Rouge Cereal • Starch Europe: - 6.1% at constant exchange rate. Stable volumes after Greenwhich closure • Ethanol Europe: + 2.8% at constant exchange rate
  8. 8. An improved Ajusted EBITDA margin EBITDA - Q2 In R$ MM 61 121 29 6 139 51 +1.4% 223 226 26 Brazil La Réunion Mozambique Starch Europe Ethanol Europe In R$ MM 120 29 10 6 189 41 +44.3% 198 286 12 Adjusted EBITDA - Q2 8 Q2 2009/10 Q2 2010/11 -6 0 719 61 -4 Total Holdings -6 0 719 56 Q2 2009/10 Q2 2010/11 Sugarcane • Brazil: Adjusted EBITDA margin of 30.9%, • La Réunion: Adjusted EBITDA margin of 25% Cereal • Starch: Adjusted EBITDA margin of 9.5% Ethanol: Adjusted EBITDA margin 4.4% Adjustments : R$59.8 million, including Biological Assets (R$36 million), Financial Instruments (R$20.8 million) and discontinued operations (R$3 million)
  9. 9. From Adjusted EBITDA to Net Income Q2 2010/11 286 In R$ MM 226 (60) Discontinued operations: -R$3 MM Fair value of biological assets: -R$36 MM Fair value of financial instruments: -R$21 MM Mainly Mandu and Vertente : -R$32.6 MM And GQF: -R$13.9 MM 9 63 (43) 233 (41) (18) (1) (19) (163) Syral: -R$15.5 million Guarani (+Mozambique): -R$27.3 million Adjusted EBITDA Depreciation & Amortization Operating Income Net Financial Expenses Associates Net Income Before Tax Income Tax Net Income Minority Interest Net Income Group Share EBITDAAdjustements Gain & Losses on Forex: +R$1 MM Fair-value: +R$4 MM
  10. 10. Debt Debt In R$ Million Sep 30, 2010 Jun 30, 2010 Change Current 1,667 1,598 + 4.3% Non-current 1,236 1,001 + 23.5% Amortized cost (16) (9) + 272.8% Total Gross Debt 2,887 2,590 + 11.5% In € 1,388 1,245 + 11.5% In USD 757 424 + 78.5% In R$ 703 857 - 18.0% Other currencies 55 73 - 24.7% Cash and cash Equivalent (440) (382) + 15.2% Total Net Debt 2,447 2,208 + 10.8% Real- denominated 24.2% Other currencies 1.9% Gross Debt Breakdown by currency 10 Total Net Debt 2,447 2,208 + 10.8% Related parties net debt (31) (6) + 416.7% Total Net Debt + Related parties 2,416 2,202 + 9.7% Net Debt: R$2,416 million + 9.7% vs. June 2010 • In line with seasonal increase in working capital and recent acquisition needs Net Debt / EBITDA: 3.4x US Dollar- denominated 26.1% Euro- denominated 47.8%
  11. 11. Cash Flow Cash Flow In R$ Million Q2 2010/11 Adjusted EBITDA 286 Working capital variance (197) Other operating (6) Operating Cash Flow 82 Financial interests net of dividends paid and received (50) Capex net of proceeds from the disposal of assets (70) Capex (104) Proceeds from the disposal of assets 35 Cash Flow before acquisition and capital increase (37) 11 Total net debt increase: R$214 million vs. June 30, 2010 • Working capital variance: seasonality impact in Brazil and Indian Ocean • Acquisition and scope impact: Mandu and GFQ Cash Flow before acquisition and capital increase (37) Acquisition & Perimeter impact (128) Capital increase 0 Free Cash Flow (165) Forex impact (49) Total net debt 214
  12. 12. Operating Segment Review
  13. 13. SugarcaneSugarcane Brazil - Indian Ocean
  14. 14. Sugarcane - Brazil Production Ethanol Sales (‘000 m³) Energy Sales (‘000 MWh)Sugarcane Crushing (MM t) Sugar Sales (‘000 t) 5.2 3.9 0.4 5.9 8.8 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 305 267 238 213 488 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 132 120 120 99 179 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 44 32 7 42 113 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 14 Record level of sugarcane crushing: 8.8 million tons (+ 67.6% vs. Q2 2009/10) Completed integration of Vertente and Mandu Increased sugar production capacity in São José and Cruz Alta mills and start-up of Tanabi’s sugar factory Sugar production: 766 000 tons (+ 82.8% vs. Q2 2009/10) • Mix: 58% sugar and 42% ethanol Ethanol production: 340 000 m³ (+ 87.8% vs. Q2 2009/10) • Anhydrous: 33.5% of total ethanol vs. 28.7% in Q2 2009/10
  15. 15. 355 +27 +141 613 +17 +34 +39 Sugar Ethanol Sugarcane - Brazil Financials In R$ MM Revenues Key Figures In R$ Million Q2 2010/11 Q2 2009/10 Change Reported Revenues 613 355 + 72.7% Gross Profit 158 120 + 31.7% Gross Margin 25.9% 33.7% EBITDA 139 51 + 175.1% EBITDA Margin 22.7% 14.4% Adjusted EBITDA 189 41 + 360.9% Adjusted EBITDA Margin 30.9% 11.5% EBIT 42 7 + 542.5% EBIT Margin 6.9% 1.9% Adjusted EBIT 92 - 3 n/a 15 Q2 2009/10 Price & Mix Volume Price & Mix Volume Others* Q2 2010/11 *inc. Cogeneration Agricultural Products and Hedging Adjusted EBIT 92 - 3 n/a Adjusted EBIT Margin 15.0% -0.8% Capex 41 3 n/a Sharp increase in revenue: + 72.7% vs. Q2 2009/10 Sugar: strong market conditions • 65.4% of total revenue • Sales volume: + 60.3% vs. Q2 2009/10 • Price (R$/ton): + 7.2% Ethanol: recovery in ethanol consumption • 24% of total revenue • Price (R$/m³): + 13.5% Revenues: + R$258 million Gross Margin excluding net accounting effect of fair value adjustments on biological assets: 29.5% Adjusted EBITDA: R$189 million Capex • Plantation activities: R$12.5 million • R$28.8 million for crushing and cogeneration capacity at Mandu (R$13.4 million), São José, Tanabi (R$6.6 million), and operational improvements (R$8.8 million)
  16. 16. Sugarcane - Indian Ocean Financials Key Figures In R$ Million Q2 2010/11 Q2 2009/10 Change Reported Change Constant Currency Revenues 15 18 - 18.2% + 19.6% Gross Profit - 10 25 - 140.6% - 39.6% Gross Margin - 66.7% 138.9% EBITDA - 4 26 - 115.9% -123.7% EBITDA Margin - 26.6% 144.4% Adjusted EBITDA 10 12 - 16.6% + 161.9% Adjusted EBITDA Margin 66.7% 66.7% Key Figures In R$ Million Q2 2010/11 Q2 2009/10 Change Reported Change Constant Currency Revenues 116 35 + 231.4% + 297.0% Gross Profit - 42 - 21 - 103.1% + 146.1% Gross Margin - 36.2% - 60.0% EBITDA 29 6 + 348.8% + 430.1% EBITDA Margin 25.0% 17.1% Adjusted EBITDA 29 6 + 383.3% + 430.1% Adjusted EBITDA Margin 25.0% 17.1% La Réunion Mozambique 16 Adjusted EBITDA Margin 66.7% 66.7% Capex 5 7 - 28.6% Revenues: + 19.6% at constant exchange rate in Q2 2010/11 COGS in Q2 2009/10 affected by the fair value adjustment of biological assets of R$13.8 million Investments targeting acceleration in the yield improvements of this crop: irrigation, draining and replanting of sugarcane fields Adjusted EBITDA Margin 25.0% 17.1% Capex 41 3 n/a Crushing: 1 million ton, + 11% vs. Q2 2009/10 Revenues • Integration of Groupe Quartier Français acquired on July 3 Adjusted EBITDA: sharp increase Capex: R$41 million • Environmental investments: R$6 million • Maintenance: R$35 million
  17. 17. CerealCereal Starch Europe - Ethanol Europe
  18. 18. Starch Europe - Syral Production Co-products Sales (‘000 t) 258 236 236 239 257 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 Cereal Grinding (‘000 t) Starch & Sweeteners Sales (‘000 t) Ethanol & Alcohol Sales (‘000 m3) 424 392 413 437 424 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 49 42 45 45 46 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 686 638 673 693 702 Q2 09/10 Q3 09/10 Q4 09/10 Q1 10/11 Q2 10/11 Cereal grinding increased 2.5% to 702,000 tons, in line with strong market demand for starch products • Starch and Sweeteners: 90.1% of production • Alcohol & Ethanol: 9.9% of production Syral maintained its 2009 sales and inventory volumes levels with the optimization of its industrial sites, after the closure of the Greenwich plant • Starch and Sweeteners production now distributed among 5 plants in France (2), Belgium (1), Italy (1), Spain (1) 18
  19. 19. Key Figures In R$ Million Q2 2010/11 Q2 2009/10 Change Reported Change Constant Currency Revenues 591 741 - 20.2% - 6.1% Gross Profit 128 209 - 38.8% - 26.4% Gross Margin 21.7% 28.2% EBITDA 61 121 - 49.6% - 40.7% EBITDA Margin 10.5% 16.3% Adjusted EBITDA 56 120 - 53.3% - 44.6% Adjusted EBITDA Margin 9.5% 16.2% EBIT 29 84 - 65.1% - 50.2% EBIT Margin 5.0% 11.4% Adjusted EBIT 24 83 -71.1% n/a Adjusted EBIT Margin 4.1% 11.3% Capex 18 77 Starch Europe - Syral Financials 741 (111) (4) (35) 591 Revenues In R$ MM Capex 18 77 - 76.6% Gross Profit • Impacted by 20% increase in gas price expenses Adjusted EBITDA : R$56 million • Fair value: + R$3 million (energy), + R$10 million (currencies), - R$8 million (cereals) Capex : R$18 million • Energy savings • Selby grain alcohol plant: Optimization of the production line and equipment purchase 19 Revenues: -6.1% at constant currency, but + 2.7% sequentially Stable volumes despite the closing of Greenwich plant Decrease of prices in mix of products sold Normalized gross margins in Q4 as new sales contracts reflect higher raw material and energy costs Q2 2009/10 Currency Volume Price & Mix Q2 2010/11
  20. 20. Ethanol Europe Financials Revenues In R$ MM 183 (27) +10(5) 160 Key Figures In R$ Million Q2 2010/11 Q2 2009/10 Change Reported Change Constant Currency Revenues 160 183 - 12.6% + 2.8% Gross Profit 7 23 - 70.9% - 65.8% Gross Margin 4.4% 12.6% EBITDA 7 19 - 63.8% - 57.3% EBITDA Margin 4.4% 10.9% Adjusted EBITDA 7 19 - 63.1% - 57.3% Adjusted EBITDA Margin 4.4% 10.9% Capex 6 19 - 68.4% 20 Q2 2009/10 Currency Volume Price & Mix Q2 2010/11 Production : 66,000 m³ + 4.8% vs. Q2 2009/10 Revenue : + 2.8 % at constant currency rate vs. Q2 2009/10 • Reduction in gross margin mainly due to higher energy prices (+R$4 MM in the quarter) and higher industrial costs due to irregular industrial production Alcohol and Ethanol: • 5.4% price increase but light reduction in volume Revenues: + 2.8% at constant currency EBITDA • Lower operational efficiency after barley test • Technical improvements works during the quarter • Higher energy costs Capex: R$6 million • Technical improvement of facilities and energy savings
  21. 21. Outlook and Summary
  22. 22. Outlook - Short Term Sugar Market: world stocks at very low levels – Brazil: tight supply, lower-than-expected increase in sugar production in Center-South Solid margins in a positive environment despite a reduction in the expected crushing from 20.3 million tons to 20 million tons Starch Wheat, Corn: world stocks estimated to be sufficient to meet demand levels Corn: lower yields may cause increase in near term corn prices. Company’s hedging policy to reduce impacts of cereal prices increases Progressive return to normalized Starch & Sweeteners margins. Favorable drivers for future contract 22 Progressive return to normalized Starch & Sweeteners margins. Favorable drivers for future contract negotiations (Q4): • Increased structural demand • Tight supplies • Lack of availability of large volumes in some markets Ethanol Market: solid prices as more sugarcane is diverted to sugar and as increased corn and wheat prices Improved margins, driven by first premium alcohol volumes delivered by DVO and recovery in industrial performance in Lillebonne First deliveries of the 2.2 MM m³ ethanol agreement with Petrobras and improved mix anhydrous/hydrous
  23. 23. Outlook - Medium Term Sugarcane activities • Brazil – Cogeneration: 2 energy contracts representing an average of 55.7 MW awarded to Guarani for the 2013/14 crop for Mandu and São José plants • Continued high sugar and ethanol prices for the Brazilian sugarcane operations, despite a reduced crop in Brazil • Continued contributions from recent acquisitions in Brazil and La Réunion Cereal activities 23 Cereal activities • Ethanol – Gluten: investment plan approved for the improving Lillebonne product mix by producing gluten alongside ethanol in the plant • Normalized gross margins for the European cereal operations in the final quarter Tereos Internacional is well positioned to address new industry landscape and implement its long-term growth strategy
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