METALFRIO SOLUTIONS S.A. Fourth Quarter 2022 and Full Year Results April 26th, 2023
São Paulo, Brazil, April, 26th 2023 - Metalfrio Solutions S.A. (FRIO3) ("Metalfrio"), the world's leading cold solutions provider, announces its results for the fourth quarter of 2022 ("4Q22") and full year of 2022 ("FY22"). Financial and operational information given are in accordance with accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS), in Brazilian Reais (R$). Comparisons are with the fourth quarter of 2021 ("4Q21") and full year of 2021 ("FY21") or as indicated.
4Q22 AND FY22 HIGHLIGHTS
- Net revenue of R$ 1,990 million in 2022, consolidating the new level reached in 2021. The 2.7% drop, year-on-year, was due to the adverse economic conditions in the EMEA region. All other regions showed growth.
- The service segment expansion strategy continues to deliver good results with net revenue reaching R$322 million in the accumulated of the year 2022 with a growth of 19.7%. In South America, revenues steaming from services already represents 22,8% of the total (16.2% including the other regions).
- Adjusted Ebitda of R$236 million, which represents the best result ever achieved by the Company in its history, with all regions contributing positively. EBITDA adjustments refer to non-recurring expenses and provisions for closing unprofitable operations.
- Net Loss of R$63,3 million in 4Q22 and R$195 million in 2022 vs Net Loss of R$56 million in 2021, basically due to higher financial expenses throughout 2022, added by write-offs and provisions made in 4Q22.
Commenting on the results, the Company stated:
2022 was a year of great challenges, but despite that, we managed to maintain the company's historical record level of revenue.
We operate in regions that were significantly affected by the conflict between Russia and Ukraine, which negatively impacted business, not only in these countries, which are already important in themselves, but also in the entire neighborhood, including Eastern and Western Europe. The strategy was to focus on products with the highest average price and profitability, and as a result unit volume fell by 22% year-on-year, but revenue was only 15% lower. The commercial strategy remains for 2023 and the company already has its cost structures at the factories in Russia and Turkey adjusted for this volume.
In Central and North America, the scenario is completely different. A major internal restructuring of the Mexican operation provided opportunities to gain market share. Sales for the region grew 27.2% and gross profit/loss was R$-2,3 in 2021 and R$ 5 in 2022. The company is much better positioned to continue growing in the region.
In South America, with the market leadership of the Brazilian operation, the strategy of maximizing operating cash flow resulted in a set of actions based on two key directions of great impact that made the difference in the year's results: focusing on the best segments profitability and renewed dedication to the services business, which includes the Life- Cycle Business Unit and the subsidiaries Begur and 3L. As a result, sales in units, even down 17% vs. previous year, generated revenue 5.9% higher. The service business in the region earned R$ 203.8 million as a result of a 24,3% growth compared to the previous year. As an economic result of this performance, the region reached 18,5% of gross margin, which is a record for the company. As a result of the PROSPERA initiative that started in Brazil throughout 2022 and will permeate all regions in 2023, the company has adjusted its cost structure to continue its strategy of focusing on operating cash generation, which will be fundamental for the improvement of its capital structure.
(R$ million) | 4Q22 | 4Q21 | % Var | 2022 | 2021 | % Var | ||||||||
Net Revenues | 496,6 | 559,1 | -11,2 | 1990,3 | 2046,4 | -2,7 | ||||||||
Gross Profit | 80,3 | 123,4 | -34,9 | 316,4 | 350,9 | -9,8 | ||||||||
Gross Margin | 16,2% | 22,1% | 15,9% | 17,1% | ||||||||||
Op. Profit | 16,9 | 71,1 | -76,2 | 132,2 | 163,4 | -19,1 | ||||||||
EBITDA | 31,6 | 90,0 | -59,4 | 192,1 | 230,2 | -16,6 | ||||||||
Adj. EBITDA | 80,6 | 90,2 | -59,5 | 236,2 | 232,0 | -17,2 | ||||||||
Adj. EBITDA Margin | 16,2% | 16,1% | 11,9% | 11,3% | ||||||||||
Net loss | -63,3 | -43.1 | -195,0 | -56.0 |
Fourth Quarter 2021 and Full Year Results - April 26th, 2023 | 1 |
Fourth Quarter 2021 and Full Year Results
April 26th, 2023
Net Revenue
Consolidated Net Revenues decreased 11% in the fourth quarter to R$497 million and 2.7% throughout 2022 to R$1,990 million. Such reduction occurred due to the significant reduction in the EMEA region, where we faced a more challenging macroeconomic scenario, and also due to the Company's strategy of focusing on higher value products. Net Revenue in the Americas progressed consistently with the strategies adopted in these regions to maintain margins and focus on our key accounts.
Net Revenues FY22
(R$ million)
South America
Central and North America
Europe, Middle East and Africa
TOTAL
4Q22
245,2
53,6
197,6
496,5
4Q21 | % Var | 2022 | 2021 |
239,7 | 31,5 | 844,6 | 797,5 |
57,0 | 3,1 | 267,2 | 210,1 |
262,5 | (24,7) | 878,5 | 1.038,9 |
559,2 | 2,2 | 1.990,3 | 2.046,4 |
% Var
5,9
27,2
(15,4)
(2,7)
South America | Europe, Middle East and Africa (EMEA) |
Sales in 4Q22 reached R$245 million (an increase of 2.3% compared to 4Q21), as the region continued to show significant growth in the distribution channel, as well as in non-Key Accounts, the most important drivers of growth in 2021.
For the full year 2022, sales for Key-Accounts increased by 31.7% in volume and 51.8% in revenue compared to a decrease of 36% in volume and 18.3% in revenue for non- Key Accounts, a change in the 2022 sales strategy contributed to maintaining margins and strengthening the channel.
Services continued the consistent growth pattern, increasing 23,9% in 2022 through the acquisition of new customers, especially in Brazil, demonstrating the strength of this line of business of our Company (Life- Cycle + Begur + 3L).
Central & North America
In 4Q22, the region registered a -5.9% reduction in Revenues compared to 4Q21, however in the accumulated of the year 2022 it experienced an increase of 27.2% compared to 2021, mainly supported by a significant increase in sales to the bottlers in the US, which reflects the Company's share gain in this market.
Services also experienced a significant growth in 2022 of 37,6% compared to 2021, in line with the company's global strategy.
In 4Q22, EMEA sales decreased -24.6% compared to 4Q21 and reached R$ 197.6 million.
In the full year 2022, Net Revenue decreased by 15.4% to R$878.4 million.
The Russia/Ukraine conflict and the consequent threat of an energy and commodity crisis has decisively affected the markets served by our factories in the region. The strategy was focused on defending profitability and cash generation in an environment of repressed demand.
As shown, the maintenance in 2022 of the new revenue level achieved in 2021 despite all the difficulties of the period allows us to report a historical series of growth with a CAGR of 10.5%.
Net Revenues (R$ million) | |||||||||
CAGR | |||||||||
10,5% | |||||||||
2,046 | 1,990 | ||||||||
1,481 | 1,445 | ||||||||
1,018 | 1,014 | 986 | 1,197 | ||||||
813 | 881 | ||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 |
Fourth Quarter 2022 and Full Year Results - April 26th, 2023 | 2 |
Fourth Quarter 2021 and Full Year Results
April 26th, 2023
Gross Profit (R$ million) & Gross Margin
As a result of high internal inflation in Turkey, not accompanied by currency devaluation, the generation of gross profit was hampered by the fact that the company's sales are mostly in Euros and Dollars. By the way, throughout 2022 the functional currency of the Turkish operation (Klimasan) was reset to Euro, since most of the transactions of this plant are carried out in this currency. This loss of R$67,9 million, year on year in the region, was not fully offset by the other operations, which led the gross margin to drop from 17.1% in 2021 to 15.9% in 2022. The Brazilian operation took the gross margin in South America to an all-time high of 18.5%.
Operating Expenses (SG&A)
Selling, general and administrative expenses decreased by 25% to R$52 million in 4Q22, mainly due to the reduction in selling expenses (-34,7% vs 4Q21). Already considering the full year of 2022, operating expenses decreased by 9%, reflecting the 12,9% reduction in selling expenses and 2,9% in administrative expenses.
As a percentage of Revenues, SG&A fell to 11.7% from 10,9%, reinforcing the Company's commitment to bring this indicator to single-digit.
EBITDA & EBITDA Margin
Fourth quarter EBITDA decreased 64,8% to R$31,6 million due to the reduction in Gross Profit partially offset by reductions in operating expenses, and also extraordinary events. In the full year of 2022, EBITDA dropped 19,7% to R$187,2 million.
In 2022, the Company made the decision to close business units that had negative cash generation combined with low strategic relevance. Among these measures, the business units in Argentina, Bolivia, Denmark, Indonesia and Nigeria were closed, the goodwill of Enerfreezer in Mexico was written-off and the business unit specialized in IoT (asstes365) located in England was sold. Such measures will allow important savings in the coming years
Adjusting EBITDA for the factors mentioned above, 4Q22 Adjusted EBITDA decreased 10,6% to R$80,6 million, and Adjusted EBITDA for the year increased 1% to R$236,2 million. The Adjusted EBITDA Margin increased to 11.9% in 2022 from 11.3% in 2021.
Despite mixed market conditions, the Metalfrio team's track record of execution remains strong with a 2013-2022 adjusted EBITDA CAGR of 23,8%, along with a consistent ability to improve margin.
Reconciliation of EBITDA and Adjusted EBITDA
EBITDA (R$ million)
Operating result Depreciation and amortization
4Q21
71,1
18,9
1Q22
49,1
12,1
2Q22
40,0
14,2
3Q22
26,1
14,0
4Q22
16,9
14,7
4Q22 vs
4Q21
-76,2%-22,2%
EBITDA | 90,0 | 61,3 | 54,2 | 40,1 | 31,6 | -64,8% |
Other extraordinary expenses/ | 0,2 | 0,0 | 0,0 | 0,0 | 49,0 | |
(income) (i) | ||||||
Adjusted EBITDA | 90,2 | 61,3 | 54,2 | 40,1 | 80,6 | -10,6% |
- Expenses related with the shut-down of operations in South American countries totaling (R$ 2,9)
- Restructuring in Mexico with write-off of obsolete inventories (R$16.0) and recognition of losses with the closure of operations (GDP R$5.3)
- Recognition of expenses and costs with the sale of the operation with the company asset365 (R$17,7)
- Costs with closing the Danish operation (R$7,0)
Fourth Quarter 2022 and Full Year Results - April 26th, 2023 | 3 |
Fourth Quarter 2021 and Full Year Results
April 26th, 2023
Financial Result
The Net Financial Result in 4Q22 continued to be negatively impacted by high interest rates, mainly in Brazil, and registered a financial expense of R$74,4 million in 4Q22.
Considering the full year of 2022, the rise of interest rates in Brazil and also in other locations, such as Turkey and Mexico, led to an increase in expenses with interest on loans of 86,3%. Throughout 2022, the Company also constituted a provision for possible losses in the financial investment portfolio. These two impacts led to an increase in expenses related to interest and other financial expenses of 181,7%, from R$129 million in 2021 to R$363 million in 2022.
Throughout 2022, the Company obtained a positive net exchange rate result of R$61 million, as a result of the devaluation of the Turkish Lira against the Euro (the functional currency in Turkey is the Euro and some of the financing was taken out in Turkish Lira) and the devaluation of the Euro against the Brazilian Real, given that part of the Parent Company's financing is provided through a loan with its subsidiaries denominated in Euros.
Net Profit/Loss
Net Loss in 4Q22 was R$63,3 million compared to a Net Loss of R$43 million in 4Q21. In 4Q22, losses on investments abroad were recognized, as well as the write-off of obsolete assets and goodwill from discontinued investments.
In the accumulated result for the year, the Net Loss of R$195 million in 2022 was basically due to the losses in financial results that occurred in 2022 and the asset write-offs mentioned above.
Fourth Quarter 2022 and Full Year Results - April 26th, 2023 | 4 |
Fourth Quarter 2021 and Full Year Results
April 26th, 2023
Working Capital
In 4Q22, working capital excluding financial assets and liabilities was R$545 million. The increase was due to the increase in the payment term with customers, as a result of higher sales to Key-Accounts, which generally have a longer term, and the reduction in terms with suppliers. Working Capital utilized in Inventories reduced by R$20 million throughout 2022.
Fixed Assets
Property, Plant and Equipment (PP&E)
In 4Q22, net fixed assets were R$294 million (vs R$277 million in 4Q21), with the increase explained mainly by investments made in the plants of Turkey and Brazil.
Intangible assets
Total intangible assets of R$150 million in 4Q22 (vs R$164 million in 4Q21) partially impacted by goodwill write-offs from unprofitable operations in Mexico.
FIXED ASSETS
(R$ million)
Net PP&E
Intangibles
Total
4Q21
277,1
163,8
440,8
1Q22
253,2
157,2
410,3
2Q22
284,9
158,5
443,4
3Q22
293,2
156,8
450,0
4Q22
294,4
149,7
444,1
Chg. 4Q22/
4Q21
+17,3 -14,1
+3,2
Fourth Quarter 2022 and Full Year Results - April 26th, 2023 | 5 |
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Metalfrio Solutions SA published this content on 27 April 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 April 2023 23:15:36 UTC.
