Conferência Santander (somente em inglês)
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Transcript of Conferência Santander (somente em inglês)
1
Santander 9th Conference August 22, 2008
2
Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
3
GG Group
Espírito Santo Group
AIGCapital
Asas Group
Independent private equity fund managed by Antônio Kandir, former Planning Minister
Its private equity division is present in Portugal, Spain,France and Brazil with 32 companies in its portfolio
Approx. US$7.8 billion in private equity investments in emerging markets. Recent success stories include Gol and Fertilizantes Heringer, among others
Investment fund of Constantino family, founders and controlling shareholders of Gol, which recently acquired Varig
Ownership Structure
AIG Capital
18.3%
GG Group Espírito Santo Group
18.3% 9.1% 33.5%
Asas Group
17.7%
Isofilme
100.0%
Shares in Treasury
3.1%
Total: 85.6 million shares
4
#1 manufacturer of nonwovens in Latin America56% market share in Brazil (hygiene products)
Nonwovens: 82% of our Net Revenues* Major End-uses
DiapersFeminine hygieneFurniture & beddingMedical disposables
Key Customers
Construction Companies
#3 manufacturer of PVC pipes in Brazil• 7% market
share
PVC: 18% of our Net Revenues* Major End-uses
ContractorsInfrastructure
Key Customers
Providência operates two business divisions with over 1,000 employees
Overview
* On 2Q08
Our Focus: The Nonwovens Segment
Nonwovens were created in the 50s from the combination of three technologies
Providência has the best platform within the winning technology
Nonwoven
Plastic Textile
Paper
What is a Nonwoven Fabric?
Created when paper, textile and
chemical technologies were
combined to produce new fabrics
and products with the attributes of
textiles, but at significant lower costs
Polypropylene is the main raw
material
• Approximately 87% of nonwovens
COGS
5
6
Our Nonwovens Focus: Consumer Goods Industry
Product Mix (% of Nonwovens Net Revenues)
Providência is focused on high value-added nonwoven products with high growth potential (hygiene and medical disposables)
Market Segmentation Outlook
Value-addedproducts
Medical Disposables
Hygiene / Consumer Goods
Durables
Operatingmargin
Expectedgrowth
Double digit
Double digit
Singledigit
Marketsize
High
Medium
Low
Small
Large
Medium
Medical0%
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Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
Outlook in BrazilNonwovens demand can grow an additional 3x as a result of higher usage per diaper…
Nonwovens Usage Per Diaper (m2/diaper)
Brazil
0.17
0.54
Basic Diaper Premium Diaper
0.33
Mid Tier
Basic Diaper Share of Total Diaper Sales
…and Providência has the technology to lead this growth
Estimated Disposable Diapers Penetration
70% 65% 65% 60% 60%53%
40% 35% 30% 30% 30% 35%
Chi
le
Uru
guay
Arg
entin
a
Ven
ezue
la
Col
ombi
a
Mex
ico
Per
u
Bra
zil
Ecu
ador
Bol
ivia
Par
agua
y
Oth
ers
Evolution of Baby Diaper Penetration in Brazil
Leading Market Position & High Barriers to Entry
Providência is the leading manufacturer of nonwoven fabrics in South America with over 1.5x the capacity of the second largest player
High Barriers to EntrySouth American Main Spundbond Players: Total Capacity(2008 in tons)
Source:Technomic International
Note:1. Hygienic Disposable Lines Reicofil 3 or 4The update was made in accordance with market data and Providência’s estimates.
Scale to service major clients
Typical investment for a new entrant
is approximately US$60 million
24 months of project implementation
Certification process with major
consumer companies can take up to
18 months to be concluded
Know-how and highly specialized
workforce
7 lines R3/41
4 lines R3/41
2 lines R3/41
Providência achieved its leading position by adding a new machine every two years since 1988
80,000
48,000
34,000
3,000
4,200
4,200
5,000
- 20,000 40,000 60,000 80,000
Sulbrasil
Lord
Polystar
Softbond
Fitesa
PGI
Providência
9
10
Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
11
Operational and Administrative Highlights
Operational startup of Kami 9:
Sales beginning on April;
World-class quality, in line with top international products;
Full capacity of 1,250 tons/ month reached on June;
Main products are ultrathin special hygienic disposables and medical disposables.
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Isofilme Operations:
End of investments and
improvements at Isofilme
production process;
Full capacity of 800
tons/month reached on
June/2008;
On the 2nd Quarter 2008 it
increased 2,300 tons of
hygienic disposables to the
domestic market.
Operational and Administrative Highlights
EBITDA Margins higher than the consolidated KAMI margins due to
fiscal incentives in Minas Gerais State
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Operational and Administrative Highlights
Specialties in Hygienic Disposables:
Laminated nonwovens production line at full capacity in the 2Q08;
Projects to expand the production capacity of specialties in hygienic disposables
in progress, with 2008 total capital expenditures estimated at R$23 million and
startup operations on 4Q08.
Domestic Market
Volume in tons of laminated/
printed hygienic disposables
Price premium of printed hygiene
versus commodity
hygienic disposables
Exports
14
Operation - Pipes and Fittings Division:
Start-up sales of large-diameter pipe extrusion line to the industrial segment with
installed capacity of 5,000 tons/year.
Operational and Administrative Highlights
Other:
Repurchase of 2.9 million shares (92% of authorized) since the beginning of the
program until July 28, 2008, at a total cost of R$22.1 million;
Implementation (go live) of SAP system on July 1st, 2008.
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Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
16
Increase of 31.3% over 2Q07,more significant in the NonwovensDivision that increased 42.4% in thesame period, due to the expansionin volume added by Isofilme,acquired in August 2007, and atKAMI 9, installed in 2007 andoperating since April 2008;
Increase of 12.5% in comparisonto 1Q08, having the NonwovensDivision increased 18.8% in thesame period.
Sales Volume
In thousands of tonnes
Total: 18.4
Total: 21.4
Total: 24.1
17
Gross Revenue
Increase of 25.7% in relation to2Q07 and 10.9% when comparedto 1Q08:
Sales to the export marketincreased 23.2% over 2Q07 and3.2% in relation to 1Q08, even in ascenario of significant appreciationof the real against the dollar.
Sales to the domestic marketincreased 26.8% over 2Q07 and14.7% when compared to 1Q08,due to the start-up of Line 9 andIsofilme’s full capacity utilization.
In million of Reais
18
EBITDA (R$ million) and EBITDA Margin (%)
Adjusted EBITDA reached R$ 30.9million (with margin of 24.2%), 17.5%over 2Q07;
Increase of 17.3% in relation to1Q08;
EBITDA Adjusted by the hedgeoperation* totaled R$ 31.4 million (withmargin of 24.6%), 19.3% over 2Q07;
In relation to 1Q08, the growth was13.7%, mainly due to the increase inSales volumes.
Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivables from the export market.
27.6
31.4
19
Net Income (R$ million) and Net Margin (%)
Net Income of R$ 13.8million with net margin of10.8%, reverting the lossregistered in 2Q07 due to thefinancial expenses on accountof the promissory notes andthe exchange gains/lossesfrom the export market;
Increase of 40.6% over1Q08, when was recorded aprofit of R$ 9.8 million and amargin of 8.5%.
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Net revenue totaled R$ 103.7 million in2Q08, up 34.4% in relation to 2Q07 and up17.3% in relation to 1Q08;
These results are mainly due to theincrease in sales and to the full capacityutilization of Isofilme and Kami 9 (reached inJune 08)
Volume reached 17.9 thousand tonnes,up 42.4% when compared with 2Q07.The domestic market posted a growth of15.5% (mainly Isofilme) and the ExternalMarket registered a 33.7% increase dueto Kami 9;
Compared to 1Q08, the increment wasof 18.8%;
Nonwovens Division
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Nonwovens DivisionUnitary Fixed Cost in line with 2Q07;
In relation to 1Q08 there was areduction of 8.1% due to efficiency gainsand increased scale of production.
Reduction of 0.3% compared with 2Q07, thanks toefficiency gains and increased scale of production,despite the increase in petrochemical resin prices.Indexation of the raw material supply contracts to thedollar also contributed to partially compensating for theupward pressure of resins on the external and domesticmarkets.
In relation to 1Q08, there was a reduction of 2.7%, onaccount of the fall in exports, which have a greaterlogistics cost.
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Adjusted Ebitda through OperationalHedge* was of R$28.4 million (Margin of27.4%), 19.5% increase compared with2Q07.
EBITDA of R$ 27.9 million, with a margin of26.9%, 17.5% increase over 2Q07.
Growth was 24.3% compared with 1Q08, dueto the increase of the domestic sales. .
Nonwovens Division
Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
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Revenue of R$ 22.8 million, with a17.6% growth when compared to 2Q07and a 2.3% reduction when compared to1Q08, due to the product mix change thatdrove to a decrease in price (reduction ofapproximately 3% over the averageprice).
2Q08 volume was of 5.7 thousand tonnesin line with 1Q08 and 14.2% over 2Q07.
Pipes and Fittings Division
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Growth of 7.8% in relation to 2Q07 due to anew sales and operational structure in line withthe strategy of the Pipes and Fittings Division
Compared to 1Q08 there was a reduction of3.5%.
0.3% increase in comparison with2Q07 and 1.4% increase when comparedto 1Q08.
PVC’s resin prices presented a slightincrease when compared with those of1Q08
Pipes and Fittings Division
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EBITDA of R$ 2.9 million,with a margin of 12.9%, naincrease of 27.6% over 2Q07and a reduction of 23.6% over1Q08.
Return to the historicalmargins due to the resin pricestabilization and to the productmix.
Pipes and Fittings Division
Consolidated net debt
Consolidated net debt
Total debt
Short term
Long term
Total
Cash and equivalents
Net debt
(R$ Million) March 31,2008
15.8
386.9
402.7
178.6
224.1
6.7
377.7
384.4
175.5
208.9
June 30, 2008
Shareholders’ Equity
Shareholders’ Equity
Shareholders’ Equity
Social Capital
Capital Reserves
Profit Reserve
Accumulated Profit
(R$ Million) March 31, 2008457.2
422.2
22.0
3.2
9.8
469.1
422.2
20.1
3.2
23.6
June 30, 2008
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Agenda
• The Company
• The Nonwovens Sector
• 2Q08 Highlights
• 2Q08 Results
• Outlook
Internationalization of the Company
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Strategic Aspects:
• Become a Global Player by using the technological potential and the Company’s knowhow in disposable hygienic and medical products.
• Participate in the global product development by locating next to the leader manufacturers of disposable diapers.
• Take advantage on the high disposable adult diapers market growth (7%per year) in the US.
Operational Aspects:
• Optimize logistical costs through the substitution of a local operation in the US for the volume exported from Brazil to the NAFTA.
•Allow the Brazilian operation to redirect its sales volume to the South American market in order to keep up with the demand growth for this region in the next 3 years.
Providência USA, Inc.
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Location:
• South East USA (in final stage of definition)
CAPEX:
• Production Equipment:
• KAMI 11: US$ 46.5 million (sep/08 to jun/09)
• KAMI 12: US$ 51.5 million (dec/08 to jul/10)
• Buildings/Installations/Utilities/Contingencies: US$ 22 million (sep/08 to jul/10)
Estimated Return on Investment:
• IRR between 17 and 21%
• ROIC between 20% and 24%
Volume Perspectives
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In tonnes
Brazilian Nonwovens Market
*PerspectiveSources: Company’s Estimates
ABIQUIM
ABINT
+5%
+15% The increase in the Brazilian Nonwovens
Market tends to absorb the whole volume currently
exported by the Company to the USA. Providência currently exports 12,000
tonnes to the USA, that will be sold in the domestic
market.
Nonwovens installed capacity 2008 2009 2010Providência Brazil 73,000 80,000 80,000
Providência United States - 18,000 40,000 Total 73,000 98,000 120,000
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CFO: Eduardo Feldmann CostaIR Manager: Gabriela Las CasasPhone: +55 (41) 3381-7600 Fax: +55 (41) 3283-5909São José dos Pinhais – PR - Brazilwww.providencia.com.br/ir
The words “believe”, “anticipate”, “expect”, “estimate”, “will”, “plan”, “may”, “intend”, “foresee”, “project” and other similar expressions indicateforward-looking statements. These forward-looking statements involve uncertainties, risks and assumptions, since they include information relatedto our potential or assumed future operating results, business strategy, financing plans, competitive position in the market, industry environment,potential growth opportunities and the effects of future regulations and competition. In addition, forward-looking statements refer only to the dateon which they were made and should not be taken as a guarantee of future performance. Providência is under no obligation to update thispresentation with new information and/or future events .