Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales have grown by a robust 5.1% in the quarter, with all geographies showing healthy organic growth.
- EBITDA margin improved by 120 basis points, now standing at 11.3% on a year-to-date basis.
- EPS has grown by over 5%, aided by lower financial expenses and an improved tax rate.
- Strong double-digit growth in both Cash Today and Forex business, with transformational products reaching 31.8% of total sales.
- Generated EUR 29 million in free cash flow, with a particularly strong second quarter contributing EUR 28 million.
Negative Points
- Negative currency effects continue to impact financial results, particularly in Latin America.
- Australia's restructuring costs are still affecting profitability, though expected to improve in the coming quarters.
- Net financial position increased due to the consolidation of the Indian business, impacting leverage.
- EBITDA margin, despite improvements, is still lower compared to the previous year.
- Sales in the Asia Pacific region decreased by 21% year-over-year, primarily due to the deconsolidation of Australia.
Q & A Highlights
Prosegur Cash SA (PGUUF, Financial) Q2 2024 Earnings Call Highlights
Q: Can you elaborate on your expectations for the second half of the year, given the 12% decline in EBITDA in the first half?
A: We are confident in achieving consensus EBITDA of around EUR 270 million for the full year. The second half should be strong due to several factors, including a better comparable base in Argentina, the end of restructuring in Australia, and strong performance in Latin America and Europe. Additionally, the Forex business is expected to perform well due to seasonality.
Q: Could you provide more details on the growth strategy for the Forex business and its impact on CapEx?
A: The Forex business is growing at double digits, and we have secured significant contracts, including new operations in Singapore. Most of the CapEx for this growth has already been incurred, so we should see the benefits in the second half of the year. We will continue to participate in tenders but expect to see the fruits of our investments soon.
Q: What is the expected impact of FX on Latin America, considering the depreciation of the Argentinian peso?
A: Inflation in Argentina is significantly higher than the currency devaluation, which should result in an increasing gap in the second half of the year. This trend is expected to continue, positively impacting our financial performance in the region.
Q: Can you explain the decline in financial assets related to Australia?
A: The decline in financial assets is due to value adjustments of different assets and is not specifically related to Australia. It is part of our ongoing process of valuing different asset types.
Q: What are your target penetration rates for transformation products as a percentage of sales?
A: We are currently seeing transformation products account for around one-third of total sales, and this trend is expected to continue. We aim to maintain and grow this penetration rate in the coming quarters.
Q: What is the expected impact of the Indian business consolidation on sales and margins in the second half?
A: The Indian business is expected to contribute around EUR 40 million in sales for the second half, with EBITDA margins between 10% to 15%.
Q: Why did you change the terms of your relationship in India to consolidate operations now?
A: The change is due to ongoing agreements with our partners in India, allowing us to change the consolidation method. The business has been improving consistently, and we expect this trend to continue.
Q: What is the net effect of one-off impacts, including the Indian transaction and the sale of the Luxembourg business, on EBITDA?
A: The net impact of these one-off items is less than EUR 2 million, which is included in the EBITDA.
Q: What are the reasons for the margin decline in Latin America?
A: The margin decline is primarily due to the mix impact and the devaluation of the Argentinian peso. Pass-through from prices is ongoing at a normal pace.
Q: Can you elaborate on the agreement with the Australian Banking Association and the AUD 50 million contribution?
A: The AUD 50 million contribution from our main clients will be received over the next 12 months. This will reinforce our P&L and liquidity, allowing us to accelerate the integration process and extract synergies in Australia. It will be in the form of additional revenues in our P&L.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
