Estre Ambiental, Inc. Reports 2017 Full-Year Results
Estre Ambiental, Inc. Reports 2017 Full-Year Results Adjusted EBITDA Increases 7 Percent To R$414 Million From A Modestly Lower Sales Base |
[20-June-2018] |
SAO PAULO, June 20, 2018 /PRNewswire/ -- Estre Ambiental, Inc. (NASDAQ: ESTR) ("Estre" or "Company"), one of the leading waste management companies in Latin America, today announced financial results for its full year ended December 31, 2017. The results are stated in Brazilian Reais ("R$") and prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, except as otherwise indicated. 2017 Results Highlights
Selected Operating and Financial Highlights Non-recurring events such as our participation in two tax refinancing programs offered by the Brazilian Federal Government for a limited period of time in 2017, our business combination with Boulevard Acquisition Corp II and the findings of our internal evaluation process regarding supplier relationships have affected our 2017 results. In order to not distort comparability between periods and to show additional meaningful information to investors to demonstrate the operating performance of our core business, we present certain non-IFRS measures to eliminate the effects of these events that our management considers to be isolated in nature. Table A annexed to this earning release provides detailed information describing the impact of these events that our management considers to be non-recurring and reconciles these non-IFRS metrics to our IFRS numbers for the fiscal years 2017 and 2016. Whenever we mention a measure as "Adjusted", we will be referring to the numbers indicated on Table A annexed hereto.
"Business performance in 2017 remained solid with Adjusted EBITDA growing 7 percent," Estre Chief Executive Officer Sergio Pedreiro noted. "This result was achieved despite a modest decrease in net revenues compared with the prior year. Growth in our strategic landfill operations and higher sales to commercial and industrial clients were more than offset by weaker sales to a less active oil-and-gas industry in Brazil." "Estre is well positioned to succeed as a leading full-service company in the waste management industry in Brazil, Pedreiro said. "It is our commitment to execute against that opportunity and leverage our leadership position more aggressively. There is a long runway of underserved demand, and we are uniquely positioned to service that demand through our culture of compliance, our full-service offerings, our operational excellence, and our enhanced capital structure." FISCAL YEAR 2017 RESULTS Revenues by Segment (1) Considers Elimination of intersegment transactions entered into the ordinary course of the business R$84 million (in 2016) and R$102 million (in2017)
Revenues in 2017 were R$1,365 million, a 2 percent decline in comparison with net revenues of R$1,393 million in 2016 mainly due to a decline in revenues from the Oil and Gas segment, resulting from reduced activity in the oil sector in Brazil. Landfills revenues increased by 1.2 percent in 2017 versus 2016. The 2016 Landfills revenue was positively impacted by a R$37 million one-time benefit of a catch-up in pricing in relation to our contract with the city of Maceio. Eliminating the effects of such event in connection with our Maceio contract in 2016, our Landfills segment revenue for 2017 would have increased by 10.3 percent. Collection revenues increased by 0.7 percent in 2017 versus 2016. In 2017, our collection contract with the city of São José dos Campos was terminated coupled with a partial termination of our collection contract with the city of Aracaju in circumstances we consider atypical. If we excluded the revenues from these two contracts for both 2016 and 2017, Collection revenue would have increased 4.5% instead. Adjusted Operating Costs Adjusted Operating Costs, which reflects the company's operating costs of services as reported on our income statement, excluding depreciation and amortizations charges, and adjusted to disregard the impacts of non-recurring events presented in Table A annexed hereto, decreased by R$65 million or 7 percent, from R$883 million in 2016 to R$817 million in 2017. This improvement was the result of cost management and operational improvements, particularly in the landfills business. The consolidated Adjusted Gross Margin, which we calculate as Net Revenues minus Adjusted Operating Costs divided by Net Revenues, in 2017 improved 3.5 percentage points from 36.6 percent in 2016 to 40.1 percent in 2017. Adjusted Operating Expenses Adjusted Operating Expenses, which reflects the Company's operating expenses as reported on our income statement, excluding depreciation and amortizations charges, and adjusted to disregard the impacts of non-recurring events presented in Table A, increased by R$9 million or 7.4 percent, from R$125 million in 2016 to R$134 million in 2017. This increase was mainly impacted by a net reversal in the allowance for doubtful accounts in 2016 compared to an increase in allowance for doubtful accounts in 2017. Adjusted EBITDA and Net Income Net Income improved to R$52 million in 2017 from a loss of R$361 million in 2016. Adjusted Net Income for 2017 was a loss of R$36 million compared to a loss R$ 153 million in 2016. Adjusted results improved because of higher operating margins and lower tax expenses associated with temporary differences. Adjusted EBITDA increased 7.3 percent year-over-year to R$414 million in 2017, primarily from cost reductions and operational efficiencies. Adjusted EBITDA Margin, which we calculate as Adjusted EBITDA divided by Net Revenues, was 30.3 percent in 2017, up from 27.7 percent in 2016. The Adjusted EBITDA Margin was higher than normal because of both the lower revenue growth and proactive management of costs in anticipation of lower than expected revenues in 2017. Cash and Equivalents and Capital Allocation Cash and cash equivalents at December 31, 2017, were R$85 million compared with R$31 million at December 31, 2016, an increase of R$54 million. Adjusted EBITDA less capital expenditures for 2017 was R$270 million, practically unchanged from R$266 million in 2016. The Company is committed to continue to lower its leverage, primarily through internal cash flow generation, with a goal of achieving a Net Debt-to-EBITDA ratio of 2x or lower, deploying capital efficiently for growth while preserving financial flexibility. Tax Expense In May 2017, Estre entered into the Brazilian Tax Regularization Program (known as PRT/PERT), a tax amnesty plan offered by the federal government, which allowed, for a limit period of time, Brazilian companies to settle existing tax debts. The program allowed the partial settlement of tax debts with the use of tax credits and/or the use of tax loss carry forwards, as well as the payment of the remaining balance in installments. Internal Evaluation Process Following the receipt of tax infringement notices at the conclusion of 2017 and the search by the Brazilian federal police of our corporate offices and the premises of Soma on March 1, 2018 as part of the so-called Operation Descarte, we conducted an internal evaluation process at the direction of a newly constituted Special Committee comprised of independent members of our board of directors. The specific purpose of this process was to evaluate the integrity of our supply relationships and related matters across our organization, including at Soma and our other joint ventures. In accordance with our zero tolerance policy, corrective actions were taken immediately, mainly a significant change in our organization structure at Soma. Based on the findings of this internal evaluation process, we restated our audited financial statements for the years ended December 31, 2015 and 2016 to reflect several adjustments in relation to payments made in the past for certain goods and services with insufficient evidence that such goods and services were provided. FY 2018 FIRST-HALF AND FULL-YEAR OUTLOOK "We are already seeing the benefit of the new collections contracts coming on line in the first half of 2018, and expect to see a 7-to-8 percent growth in revenues in the first-half of 2018 when compared with first-half revenues of 2017," Chief Executive Officer Sergio Pedreiro said. "For the second half of 2018 we believe we will be able to keep the same pace of growth in the ongoing business. However, considering that São Paulo contract was recently extended for six months based on new terms that included reductions in both volume and price, the expected growth for the full year of 2018 should be in the low single digit range. We expect Adjusted EBITDA Margins to return to the mid 20-percent range as we absorb the unfavorable impact of São Paulo contract renewal terms as well as the added costs and expenses of operating as a public company." INFORMATION ABOUT THE CONFERENCE CALL, THE LINK TO WHERE THIS DOCUMENT CAN BE FOUND AND INVESTORS RELATIONS AND PRESS RELATIONS. Conference call will be held in June 20th, 2018 at 8:30 am (EST). Investors and other stakeholders may access the conference call by dialing 877-407-0792 toll free in the U.S. or 1-201-689-8263 internationally. A replay of the call will be available through July 27th, 2018 by dialing 844-512-2921 toll fee in the U.S. or 1-412-317-6671 internationally, using conference ID 13679719. The Company also announces that it has filed with the U.S. Securities and Exchange Commission (SEC) its Form 20-F report for the fiscal year ended 2017. The report is available on the SEC's website, at www.sec.gov, and on Estre's Investor Relations website, at ir@estre.com.br. Shareholders can obtain copies of the Company's Annual Report 20-F, free of charge, by making a request within a reasonable period of time to the Company's Investor Relations Department. Contacts Investor Relations Media Relations About Estre Estre Ambiental, Inc. is the publicly traded parent company of Estre Ambiental S.A. following the December 22, 2017 transaction with Boulevard Acquisition Corp II. Estre trades its ordinary shares and warrants on the NASDAQ under the symbols "ESTR" and "ESTRW" respectively. Estre is one of the leading waste management companies in Brazil and Latin America, as measured by disposal capacity, collection volume and market share. Estre provides collection, transfer, recycling and disposal services to more than 31 million people in six Brazilian states where approximately 45% of Brazil's population is concentrated. Estre's landfill operations, which are currently focused around 13 strategically located landfills, dispose of approximately 6.0 million tons of waste annually. Estre also expects to add four additional landfills to its operations over the next several years. Estre's waste management infrastructure also includes two landfill gas-to-energy facilities with an installed capacity of approximately 14 MW, as well as three hazardous and medical waste facilities Forward-Looking Statements This press release includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are accompanied by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect," "should," "would," "plan," "predict," "potential," "seem," "seek," "future," "outlook," and similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding forecasts of financial and performance metrics, projections of market opportunity, macroeconomic outlook and the expected benefits of the proposed business combination. These statements are based on various assumptions and on the current expectations of Estre management and are not predictions of actual performance. These forward-looking statements are subject to a number of risks and uncertainties, including general economic, political and business conditions in Brazil; potential government interventions resulting in changes to the Brazilian economy, applicable taxes and tariffs, inflation, exchange rates, interest rates and the regulatory environment; changes in the financial condition of Estre's clients affecting their ability to pay for its services; the results of competitive bidding processes, which could lead to the loss of material contracts or curtail Estre's expansion efforts; the outcome of judicial, administrative and tax proceedings to which Estre is or may become a party or governmental investigations to which Estre may become subject that could interrupt or limit Estre's operations, result in adverse judgments, settlements or fines and create negative publicity; changes in Estre's clients' preferences, prospects and the competitive conditions prevailing in the Brazilian waste management; the strength of Estre's internal controls; those factors discussed in Estre's prospectus, dated December 8, 2017, under the heading "Risk Factors," and other documents of Estre filed, or to be filed, with the SEC. These statements speak only as of the date they are made and neither Boulevard nor Estre undertakes any obligation to update any forward-looking statements contained herein to reflect events or circumstances which arise after the date of this press release. Annex Table A: Adjusted EBITDA and Adjusted Income Statement 2016 and 2017
Table B: Indebtedness
Table C.1: Statement of Financial Position - Assets
Table C.2: Statement of Financial Position – Liabilities and Equity
Table D: Statement of Profit or Loss
Table E: Statement of Cash Flows
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Company Codes: NASDAQ-NMS:ESTR |
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