Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dexco SA (BSP:DXCO3, Financial) reported a 60% increase in adjusted and recurring EBITDA compared to the third quarter of 2023, driven by strong performance in the wood division.
- The wood division achieved an EBITDA of $407 million with a margin of 28%, up 42% versus Q3 2023, due to high demand and successful price transfers.
- LD cellulose delivered record results with an EBITDA of $443 million and margins of 61%, highlighting strong operational performance and cost management.
- The company maintained a stable working capital to net revenue ratio, supporting sustained cash generation of $146 million year-to-date.
- Dexco SA (BSP:DXCO3) is nearing the end of its '21-'25 investment cycle, with significant investments in reforestation and new facilities, positioning for future growth.
Negative Points
- The tiles division continues to face challenges, with the wet segment showing slower recovery and pressured results.
- Dexco SA (BSP:DXCO3) announced its exit from the electric showers and taps operation, indicating a strategic shift but also a reduction in product offerings.
- The company faces potential macroeconomic challenges, including high interest rates and financing rules that could impact future results.
- The metals and sanitaryware division, while showing progress, still faces challenges in optimizing its product mix and achieving desired profitability levels.
- The tiles market is experiencing rising stock levels, which could pressure installed capacity and recovery prospects.
Q & A Highlights
Q: Can you provide insights on the sustainability of the current demand levels in the wood division, considering the high interest rates and recent market dynamics?
A: Carlos Henrique Pinto Haddad, Vice President of the Wood Division, explained that the current demand is supported by strong employment rates and government-backed construction programs in Brazil. The demand is not seen as a one-off event, unlike during the COVID pandemic. The market is more rational now, with adjustments in supply and pricing due to unavoidable costs, particularly in wood.
Q: What is the rationale behind the decision to exit the electric showers and taps segment, and how does this impact the sanitaryware and tiles divisions?
A: Raul Guimaraes Guaragna, Vice President of Deca and Tiles, stated that the decision aligns with Dexco's strategic focus on core segments with greater synergies. The exit allows the company to concentrate on metals and sanitaryware, improving pricing and product mix, and enhancing supply chain efficiency.
Q: Could you elaborate on the recent announcement regarding the restructuring of forestry assets and its impact on the company's financial strategy?
A: Francisco Semeraro Neto, CFO, clarified that the restructuring involves a small portion (6-7%) of biological assets and aims to optimize the company's capital structure. This move is part of a broader strategy to enhance flexibility and accelerate deleveraging without compromising self-sufficiency in wood supply.
Q: What are the expectations for dividend payments from LD Cellulose, and how does this fit into Dexco's overall financial strategy?
A: Raul Guimaraes Guaragna mentioned that the first dividend payments from LD Cellulose are expected in 2026, with gradual increases thereafter. The strategy is to ensure reliable dividends while maintaining focus on deleveraging and capturing returns from recent investments.
Q: Are there any further plans to optimize Dexco's portfolio, and where do you see the most opportunities for improving ROIC?
A: Raul Guimaraes Guaragna indicated that Dexco continuously evaluates its portfolio for optimization opportunities. The focus is on leveraging existing assets and exploring both organic and inorganic growth avenues, particularly in the Deca brand, to enhance returns and operational efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
