Rotoplas: First Quarter 2024 Results
Rotoplas: First Quarter 2024 Results |
[23-April-2024] |
MEXICO CITY, April 23, 2024 /PRNewswire/ -- Grupo Rotoplas S.A.B. de C.V. (BMV: AGUA*) ("Rotoplas", "the Company"), America's leading company in water solutions, reports its unaudited first quarter 2024 results. The information has been prepared in accordance with the International Financial Reporting Standards (IFRS). Figures are expressed in millions of Mexican pesos. HIGHLIGHTS | 1Q24 vs 1Q23
Taking the 2023 exchange rate, and isolating the effect of devaluation in Argentina, net sales growth would have been 1.0%. - Product sales decreased by 6.1%, affected by weak demand, as well as adverse exchange rate effects, especially in Argentina, the United States, and Peru. - Service sales increased by 56.2%, driven by the ongoing expansion of bebbia and the solid growth in RSA and rieggo.
KEY FIGURES | 1Q24 vs 1Q23
KEY FIGURES | JANUARY – MARCH 2024
MESSAGE | CEO Dear investors, As we begin 2024, our focus remains on delivering decentralized water solutions and enhanced access in the regions in which we operate, while implementing operational and financial strategies to create value for our stakeholders. During the quarter, we successfully maintained profitability, achieving an EBITDA margin of over 20%, as well as a ROIC above the cost of capital. However, we faced challenges due to lower demand in Argentina, the United States, and Peru. Mexico achieved solid results, with strong performance in both services and products. The drought in the central region of the country continues to drive volume growth, while acquisitions through our Programmatic M&A strategy have brought more dynamism to rieggo and RSA. Our solutions aim to address and mitigate the growing issue of water scarcity in our country. During this period, we were able to make adjustments in production and supply chain management to meet the high demand. Our pricing strategy and ongoing business activity with our partners, distributors and plumbers, have maintained the leading position of our brands in the different regions where we operate. Regarding corporate governance best practices, on April 26th, the General Assembly will be presented with the nomination of two new independent board members, Regina García-Cuellar and Marcos Westphalen, whose experience will strengthen the Board of Directors and provide a greater diversity of profiles and perspectives. Additionally, a dividend of $0.50 MXN per share will be proposed, reaffirming our commitment to distributing value to our shareholders. We are excited about the opportunities that 2024 will continue to bring. We remain focused on providing the best service to our customers and leading the change towards a more efficient and sustainable use of water. Carlos Rojas Aboumrad INVITE | EARNINGS CALL Thursday, April 25th, 10:00am Mexico City Time (12:00pm, EST) Speakers: Carlos Rojas Aboumrad (CEO) and Mario Romero Orozco (CFO) Link: https://rotoplas.zoom.us/webinar/register/WN_Daz-WvpOSg6KhlM4GPeKdQ
GUIDANCE| 2024-2025
EBITDA| BY REGION AND SOLUTION
Mexico During 1Q24, net sales increased by 12.7% due to solid growth in both products and services. The persistent drought in the central region has boosted storage volumes, particularly in water tanks and cisterns. Similarly, water flow and improvement performed well during the quarter. It is important to note that the product sales prices in 1Q24 were lower than those in 1Q23, demonstrating the strength of sales volumes. The recent acquisitions of HiTech, IrriVan, and a treatment plant in Puebla contributed to the solid performance of services in the country. Additionally, bebbia continues to trend positively in sales and new subscribers. EBITDA margin closed at 27.7%, reflecting a decrease of 280 basis points compared to the first quarter of the previous year. This contraction is primarily attributed to price reductions and increased expenses, which have mitigated the positive effects of the solid performance in sales volumes. Argentina Net sales decreased by 30.5% in Mexican pesos and increased by 230.7% in local currency. This is due to the impact of the recent currency devaluation in the country. The widespread market contraction, especially pronounced in the construction sector, was exacerbated by the macroeconomic stabilization plan, which has negatively impacted real wages. Additionally, the pricing strategy has not fully compensated for the effects of the currency devaluation that occurred in December 2023. During the quarter, we expanded our portfolio of solutions with new faucet lines and two new models of water heaters, which have helped us stay innovative in the market and strengthen our presence at sales points. Efficient management of costs and expenses contributed to an increase of 350 bps in the EBITDA margin, which reached 16.4%. NOTE: Adoption of IAS 29, Financial Reporting in Hyperinflationary Economies. Due to Argentina experiencing inflation above 100% in the last three years, it is considered a hyperinflationary economy. In accordance with IAS 29, an adjustment for inflation has been made to the Financial Statements to consider changes in purchasing power. International Accounting Standard (IAS) 29, Financial Information in Hyperinflationary Economies establishes that the results of operations in Argentina should be reported as if they were hyperinflationary as of January 1st, 2018. Moreover, an adjustment for inflation in the Financial Statements should be made to account for the change in the purchasing power of the local currency. As a result, in the first quarter of 2024, the impact of restatement resulted in a decrease of Ps. 46 million in financial expenses, benefiting the Comprehensive Financing Result. After considering taxes, the benefit in net profit amounts to Ps. 2 million. United States During the first quarter, net sales decreased by 19.8%. The absence of drought conditions in key areas such as California and Texas reduced the demand for our water storage products. Additionally, price pressure was intensified by competitors liquidating excess inventory. The septic tank business continues to develop and has been strategically refocused to optimize service offerings according to geography, tailoring them to the specific needs of each locality and focusing efforts in states like Texas. The EBITDA margin is negative due to the reduction in sales, which has complicated the absorption of costs and expenses. The primary expenses are associated with the operation of our online commerce platform and the strategic repositioning of the septic tank business. Other countries Net sales in other countries (Peru, Guatemala, El Salvador, Costa Rica, Honduras, Nicaragua y Brazil) decreased by 6.7 % compared to the same quarter of 2023, due to slow demand in Peru that was not offset by growth in Central America and Brazil. In Peru, sales decreased due to a widespread market contraction and reduced construction activity, as well as lower government spending. The strategy in this country is focused on protecting margins and maintaining market share. Central America sales increased, driven by a good performance in the five countries and growth in all three categories: storage, water flow, and improvement. The growth in storage in Guatemala and El Salvador stands out due to the droughts experienced during the period. In Brazil, the portfolio of water treatment and recycling plant projects continues to gain good traction. Additionally, commercial partnerships have been developed, which have increased qualified leads. The EBITDA margin decreased, closing at 16.3%, compared to 19.2% in the same period of the previous year. This decline is due to the sales contraction in Peru and the expenses related to the construction of treatment plants in Brazil. ANALYSIS | COSTS AND EXPENSES Gross Profit The gross profit increased by 3.1% and the margin expanded by 300 bps to reach 50.7%, a record high figure for Rotoplas. This margin increase is due to an effective pricing strategy aimed at maintaining competitiveness, a reduction in raw material costs, and an increase in sales volumes of Tinaco Plus+ in Mexico, a product that has a lower average production cost. Operating Income The operating profit closed at Ps. 421 million for the quarter, representing a decrease of 4.0% compared to 1Q23. The operating margin decreased by 20 basis points to reach 15.8%, primarily due to an increase in operating expenses. This increase was linked to higher freight costs, attributed to the transportation of Tinaco Plus+ to plants in Mexico where it is not yet produced. Additionally, the increase in expenses was also influenced by initiatives in e-commerce and cybersecurity, as well as advertising for bebbia, which could not be offset by the lack of growth in some markets. Although these digitalization initiatives increase our expenses in the short-term, they are aligned with our long-term vision for growth and efficiency. Measures such as process optimization and contract renegotiation are underway to manage these costs effectively. Comprehensive Financing Result The comprehensive financing result for 1Q24 resulted in an expense of Ps. 64 million compared to an expense of Ps. 411 million in the same period of 2023. The 2024 expense includes Ps. 100 million for interest on debt, commissions, and leases, alongside a benefit of Ps. 36 million due to exchange rate and inflation effects in Argentina. The 2023 expense was mainly impacted by Ps. 252 million for the valuation of financial instruments for hedging exchange rate and Ps. 69 million for exchange losses and inflationary effects in Argentina. In 2024, the accounting method for hedging instruments was changed, the effects of the MXN/USD hedge are now recorded alongside costs rather than within the Comprehensive Financing Result, influencing the gross margin. Net Result The net result in the first quarter of the year was Ps. 304 million, an increase of 8.3x compared to Ps. 37 million in the same quarter of the previous year. This increase is mainly due to the reduction in financial expenses described in the previous paragraph. CapEx
Capital investments represented 3.7% of quarterly sales and decreased by 11.1% compared to the same quarter of the previous year. Capital investments include:
ANALYSIS | BALANCE SHEET Cash Conversion Cycle (Days)
Inventory Days: Average Inventory / (3M Cost of Sales / 90) During the quarter, the cash conversion cycle decreased by 56 days due to a widespread improvement in working capital management. This was achieved through increased inventory turnover, improved accounts receivable collection, and increased supplier financing.
Debt
Debt Maturity Profile Total debt decreased to Ps. 4,123 million and corresponds to the AGUA 17-2X sustainable bond, as well as a working capital loan.
FINANCIAL RATIOS
* EBITDA LTM/ net interest LTM Leverage as of the first quarter of 2024 was within the Company's debt guideline of 2.0x Net Debt/EBITDA. ROIC / Cost of Capital
ROIC: NOPAT L12M/Average Invested Capital t, t-1 The ROIC reached 14.0%, which represents a decrease of 210 bps compared to the same quarter of the previous year. However, it ended the quarter at 290 bps above the cost of capital, which recorded a decrease of 90 bps compared to the previous year. Financial derivates The use of derivative financial instruments is governed by the recommendations and policies issued by the Board of Directors and supervised by the Audit Committee, which provides guidelines on the management of exchange risk, interest rate risk, credit risk, the use of derivative and non-derivative financial instruments, and the investment of excess liquidity. As of March 31st, 2024, the market value of Grupo Rotoplas' position was:
ESG | ENVIORMENTAL, SOCIAL AND GOVERNANCE During the quarter, the following progress stands out within sustainable initiatives:
AGUA | PERFORMANCE AND ANALYST COVERAGE
Treasury shares As of March 31st, 2024, the Company had 2.0 million shares in the treasury, equivalent to an invested amount of Ps. 168 million. Treasury shares have never been cancelled.
Analyst Coverage As of March 31, 2024, analysts' coverage was provided by:
FINANCIAL STATEMENTS | INCOME STATEMENT, BALANCE SHEET AND CASH FLOW Income Statement (Unaudited figures, millions of Mexican pesos)
Balance Sheet (unaudited figures in millions of Mexican pesos)
Cash Flow (Unaudited figures, millions of Mexican pesos)
PRESS RELEASES | 1Q24
For more information, please consult the relevant events section of our website: https://rotoplas.com/inversionistas/eventos-relevantes/ CONTACT DETAILS | INVESTOR RELATIONS Mariana Fernández Maria Fernanda Escobar mfernandez@rotoplas.com mescobar@rotoplas.com
This press release may include certain forward-looking statements relating to Grupo Rotoplas S.A.B. de C.V. It relies on considerations of the Grupo Rotoplas S.A.B. de C.V. management which are based on current and known information; however, the expectations could vary due to facts, circumstances, and events beyond the control of Grupo Rotoplas, S.A.B. de C.V.
Grupo Rotoplas S.A.B. de C.V. is America's leading provider of water solutions, including products and services for storing, piping, improving, treating, and recycling water. With over 40 years of experience in the industry and 18 plants throughout the Americas, Rotoplas is present in 14 countries and has a portfolio that includes 27 product lines, a services platform, and an e-commerce business. Grupo Rotoplas has been listed on the Mexican Stock Exchange (BMV) under the ticker "AGUA" since December 10th, 2014. Pedregal 24, 19th Floor, Molino del Rey View original content to download multimedia:https://www.prnewswire.com/news-releases/rotoplas-first-quarter-2024-results-302125262.html SOURCE Grupo Rotoplas S.A.B. de C.V. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Company Codes: Mexico:AGUA |