Acucar Guarani Q1 09/10 Earnings Presentation


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Acucar Guarani Q1 09/10 earnings presentation

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Acucar Guarani Q1 09/10 Earnings Presentation

  1. 1. Q1 09/10 Results August 18th, 2009
  2. 2. Disclaimer This presentation contains forward-looking statements related to the prospects of our business and estimates for operating and financial results. Those related to growth prospects of Açúcar Guarani S.A. are merely projections and, as such, based exclusively on the expectations of the management concerning the future of the business. Such forward- looking statements depend substantially on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian and international economies and the industry and are therefore subject to change without prior notice. 2
  3. 3. Q1 09/10 Sugar Market Overview Growth in sugar prices as a Guarani’s Sugar Average Prices consequence of the decrease in (R$/ton) production by major producers, such as India and EU 900 Sugar prices closing the quarter at the 700 highest level in three years, both in US$ and in R$ terms 500 Increase in sugar prices also 300 supported by the increased net Q1 07/08 Q2 07/08 Q3 07/08 Q4 07/08 Q1 08/09 Q2 08/09 Q3 08/09 Q4 08/09 Q1 09/10 position of index-funds, speculative funds and the trading sector 3
  4. 4. Q1 09/10 Ethanol Market Overview Increase of 25% in volume of Guarani’s Ethanol Average Prices hydrous ethanol sold in the domestic (R$/m³) market (Brazilian Center-south), compared to Q1 08/09, sustained by 1000 the increased flex fuel vehicle fleet 800 Q1 09/10 ethanol prices were lower in comparison to the previous year due to 600 high offer caused by cash requirements of Brazilian producers 400 Q1 07/08 Q2 07/08 Q3 07/08 Q4 07/08 Q1 08/09 Q2 08/09 Q3 08/09 Q4 08/09 Q1 09/10 Exports slightly lower: 1 billion litres (-9.4% compared to Q1 08/09) due to reduction in US imports, but with increase in deliveries to Japan, India and South Korea 4
  5. 5. 9.5% Increase in Volume of Sugarcane Crushed in Q1 09/10 Sugarcane Increase due to own sugar cane crushed Crushed (MM t) • Strategy to increase plantation last year allowed additional supply of own sugarcane 4.5 4.1 • Third party sugarcane strategy timely due to credit crisis 2.7 2.7 2009/10 Crushing target at 14.8 million 1.8 tons 1.4 • Brazil: 14.2 million tons Q1 08/09 Q1 09/10 • Mozambique: 0.6 million tons Own 3rd Party 5
  6. 6. Strong Increase in Refined Sugar Production and Solid Ethanol Production Sugar Production Ethanol Production (‘000 t) (‘000 m³) 278 269 37 33 151 129 90 145 122 107 146 96 22 29 Q1 08/09 Q1 09/10 Q1 08/09 Q1 09/10 Refined Crystal VHP Anhydrous Hydrous Increased refined sugar production to address industrial markets and benefit from white premium Ethanol production increase in Q1 due to weather conditions that favored sugarcane allocation to ethanol Mix to shift towards sugar to benefit from high prices during the crop 6
  7. 7. 18.1% Increase in Net Revenue Driven by Higher Sugar Prices in Q1 09/10 Growth in net revenue driven mainly by: • Increase in average sugar prices in Reais Net Revenue (R$ MM) (+50.8%), reaching 703.3 R$/ton • Increase in sugar sales by 1.7% • Concentration of sugar sales in the 234 domestic market (67.7%) 18 198 19 66 81 Ethanol revenue down by 18.6% 151 98 Guarani’s Net Revenue breakdown was: Q1 08/09 Q1 09/10 Sugar: 64.3% Sugar Ethanol Others Ethanol: 28.1% Energy: 1.7% Other products: 5.9% 7
  8. 8. Sharp Rise in Adjusted EBITDA: R$49.9 Million, +185.1% over Q1 08/09 Adjusted EBITDA (R$ MM) 100 21.3% 23,0% 21,0% 80 19,0% Sharp increase in Adjusted EBITDA due to higher 60 17,0% 15,0% sugar prices and controlled costs and G&A 13,0% 40 expenses 8.8% 49.9 11,0% 20 9,0% 17.5 7,0% 0 5,0% Adjusted EBITDA Margin of 21.3% versus 8.8% in Q1 08/09 Q1 09/10 Adjusted EBITDA Adjusted EBITDA Margin Q1 08/09 Adjusted EBITDA Margin1 Adjusted EBITDA measured by ton of TRS sold of 40% R$122.5 in Q1 09/10 (+194.5%) 30% 20% 10% 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 07/08 08/09 09/10 (1) 2007/08 figures have been reclassified and changed due to law 11638/07, as compared to figures previously disclosed. 8
  9. 9. Net Profit of R$14.3 million Driven by Strong Prices and Positive FOREX Impact Net Profit (R$ MM) Net Profit: R$ 14.3 million in Q1 09/10, compared with a net loss of R$26.6 million in the same period of the prior year 14 Net profit impacted mainly by: • Strong price recovery for sugar (+50.8%) (27) • Net non-cash FOREX effect of R$86.0 million Q1 08/09 Q1 09/10 9
  10. 10. Net Debt Up but Improved Indebtedness Ratios Net Debt per Currency1 Net debt at R$ 1.1 billion, up 6.4% over the BRL previous quarter, due to working capital 39% requirements Foreign Currency 61% Short-term debt net of cash and cash-equivalents totaled R$ 233.5 million, representing 37% of total Net Debt, excluding intercompany loans (1) Includes R$112.1 million related to SHL in Mozambique Net Debt The increase in Guarani’s net debt is mainly due to per Term1 increased finished products inventories Net Debt/Adjusted EBTIDA ratio at 4.1x in June, Current 37% 2009 versus 4.3x in March, 09. Excluding Non- Current intercompany loans, Net Debt/Adjusted EBITDA 63% ratio stood at 2.4x (1) Excludes intercompany loans and cash & cash equivalent 10
  11. 11. CAPEX: Focus on Sugarcane Plantation, Cost Reduction and Efficiency Programs Continued selectivity on CAPEX: R$52 million in CAPEX Q1 09/10 compared to R$91 million in Q1 08/09 (R$ MM)1 Focus on plantation CAPEX (R$30 million) to 91 ensure adequate raw material availability and 30 productivity for next crop 52 30 61 22 Selective industrial CAPEX (R$22 million) to eliminate bottlenecks and further develop marginal Q1 08/09 Q1 09/10 capacity to lower fixed costs at São José and Tanabi PPE Planting plants CAPEX approved to allow sugar production in Tanabi as from next crop 1) CAPEX does not consider maintenance. 11
  12. 12. Sugar Market Outlook: Positive Trend in 08/09 and 09/10 World Crops Raw Sugar Prices (NY 11) cents US$/lb cents R$/lb 18 36 Q109 Q209 Q309 Q409 Q110 33 16 cents US$/lb cents R$/lb 30 14 27 Global sugar deficit expected to continue 12 24 supporting sugar prices 21 10 18 8 15 01-Apr-08 01-Oct-08 01-Apr-09 01-Jul-08 01-Jul-09 01-Jan-09 Brazilian position favoured by lower output of major producers such as India, China and EU Source: ICE Weather driving crop yields in India (drought World Sugar Balance caused by weak Monsoons) and in Brazil (heavy Inventories Production Consumption rains during winter) Production/Consumption (MM ton) 60 180 Inventories (MM ton) 160 Strong growth in global demand, unaffected by 50 crisis 140 40 120 30 100 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09E 09/10E Source: LMC 12
  13. 13. Ethanol Market Outlook: Consumption Growth Supported by Higher Sales of Flex-Fuel Vehicles Domestic Market Vehicles Sales per Fuel Type (Brazil) Sustained demand from strong sales of flex fuel Ethanol + Flex-Fuel Gas + Diesel vehicles 350 Q109 Q209 Q309 Q409 Q110 300 Increased hydrous ethanol consumption due to 250 '000 units the competitive price parity to gasoline at the pump 200 150 100 Prices expected to recover beginning in Q2 09/10 50 0 Apr-08 Oct-08 Apr-09 Jul-08 Jan-09 International Market Source: Anfavea Increased ethanol prices in the US market due to stronger corn, gasoline and oil prices Increased exports to Asia and stable sales to the European market 13
  14. 14. Outlook: Guarani Solidly Positioned to Seize Opportunities and Benefit from a Market Upturn Sugarcane crushed expected to reach 14.8 million tons in 2009/10 crop versus 14.4 million tons in previous crop Production mix geared towards sugar to allow Guarani to take advantage of the upturn in sugar prices Increased demand for ethanol due to attractive ratio between ethanol and gasoline prices at the pump. Positive price outlook as of second half of 09/10 Plants to take advantage of increased volumes and lower fixed costs per ton produced Disciplined CAPEX allocation in order to ensure expected sugarcane availability and profit from rapid pay-back programs Continued focus on balance sheet strengthening Positive non-cash effect in P&L of Brazilian Real appreciation vis-à-vis the US Dollar Strong commitment and support from Tereos, Guarani’s controlling shareholder, to seize opportunities 14
  15. 15. Thank You! Reynaldo F. Benitez CFO and Investor Relations Officer Alexandre L. Menezio Investor Relations Manager phone: +55 (11) 3544-4900 Felipe F. Mendes e-mail: Investor Relations Analyst Renato N. Zanetti Neto Investor Relations Analyst Leonardo T. Goes Investor Relations Assistant