4q07 presentation
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1
4Q07 ResultsMarch 5th, 2008
2
Agenda
• 4Q07 Operational/Administrative Highlights
• 2008 Outlook
• 4Q07 Results
3
Conclusion of Kami 9 installation:
R$ 110 million investment;
Reicofil 4 ultimate machinery, unique in Latin America, with annual capacity of
15,000 tonnes; mainly intended for high performance medical nonwoven
production and specialty hygiene disposables;
Project executed on schedule and within budget;
Installation concluded in December; equipment, raw material and product testing
in progress;
Homologation of products with clients scheduled for March.
Operational/Administrative
Highlights
4
Isofilme Acquisition:
Optimization of production schedule with a focus on hygiene disposables for the
domestic market;
Conclusion of the integration process with Cia. Providência, especially in the
commercial and administrative areas;
Investments in reducing factory bottlenecks (rotary cutting blades, new rolling
machine, automating the cutting and packaging of rolls). Production expected to
reach 750-800 tons/month beginning in March/April 2008;
Sale of nonwoven scraps, which were part of the inventory as of the acquisition;
Increase in productivity/financial indicators (losses, elimination of short-term debt,
inventory reduction etc.)
Operational/Administrative
Highlights
5
Investments and improvement in the Pipes and Fittings Division:
Hiring of a new management – start-up of the Division’s turnaround process;
Conclusion of investments for the expansion of the installed capacity to 5,000
tonnes a year, intended to large diameter pipes;
Reduction in the plant’s supervision structures;
Conclusion of investments in modernization and optimization of molds for fittings.
Operational/Administrative
Highlights
6
Short-term debt restructuring:
Settlement of Isofilme’s short-term debt in the amount of R$ 25 million;
Early redemption of the Company’s promissory notes;
Contracting of Export Credit Notes in the amount of R$ 150 million, with 5 and 6-
year maturities and a 2-year grace period;
Issue of Debentures in the amount of R$ 150 million with a 5-year maturity;
Early redemption, in January, of Isofilme’s Eurobond in the amount of U$ 9.2
million.
Operational/Administrative
Highlights
7
Short-term debt restructuring:
Net debt on December 31st, 2007: R$ 198 million
Operational/Administrative
Highlights
8
Operational/Administrative
Highlights
9
Closing down of Flexible Packaging Segment activities:
Revenue from machinery and facilities disposal: R$ 18.8 million
Closing down expenses (staff, commissions etc): R$ 2.0 million
Financial revenue from closing down: R$ 16.8 million
Recognizable income (sales minus recognizable expenses) from the closure
process: R$13.8 million (R$5.0 million in 2007 and R$8.8 million in 2008)
Operational/Administrative
Highlights
10
Other:
New ERP (SAP) implementation project in progress, on schedule and within
budget. Start-up of operations on April 1, 2008;
Operational hedge transactions: result of lock-in forward foreign exchange
contracts on accounts receivable from the foreign market;
Hiring, in February 2008, of UBS Pactual CTVM as market maker;
Share buyback process;
Operational/Administrative
Highlights
11
Agenda
• Operational/Administrative Highlights 4Q07
• 2008 Outlook
• 4Q07 Results
2008 Outlook
Expansion of 28% in the Nonwoven segment:
Production/sales increase of 15,500 tonnes, of which:
9,000 tonnes in Kami 9 (1,000 tonnes per month, as of April);
6,500 tonnes in Kami 10 (Isofilme).
Development of new products:
Introduction of nonwoven for clothes and high-performance medical disposables
with higher added value, unique in the domestic market;
Investment of R$ 18 million in the development of special nonwoven for the
hygiene disposable market.
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2008 Outlook
Expansion in the Pipes and Fittings segment capacity:
As the result of investments made in 2007, the Company will increase its
production and sales of pipings by 23% in 2008;
Automation and staff training;
Logistic optimization (industrial and freight planning).
Improvement in the operational/administrative efficiency:
Development of management tools and administrative and operational processes
review, aimed at reducing costs and improving information generation and
disclosure;
Individual goals (managers) for reduction of certain budget accounts.
13
14
Agenda
• Operational/Administrative Highlights 4Q07
• 2008 Outlook
• 4Q07 Results
15
The Company keeps expanding production
and sales volumes in its core business;
Growth of 15% compared to 4Q06, and 7.3%
versus the 3Q07;
Numbers include Isofilme sales in 3Q07 (45
days) and 4Q07 (90 days);
In 4Q07, the packaging division stopped
contributing to sales volume, having ceased
operations in September.
Sales Volume
15.0%
Tonnes Thd
16
Gross Revenue
Increase of 4.2% versus the 4Q06
and 4% versus the 3Q07;
Revenues from the export market
grew 8% over 4Q06 and 7.6% over
3Q07. Rising prices in U.S. dollars and
increased volume partially offset by the
significant valuation of the Brazilian real
(17% in relation to 4Q06 and 6.8% in
relation to 3Q07);
Gross revenue grew 2.4% in the
domestic market, mainly due to the
volume sold, particularly in the
nonwoven segment.
4Q06 3Q07 4Q07
90.8 90.8 93.0
39.3 39.5
Domestic Export
130.1
135.5
130.3
42.5
R$ million4.2%
17
EBITDA and Ebitda Margin
Ebitda reached R$ 27.4 million
(margin of 23.8%) in the 4Q07,
13% up on the R$ 24.2 million
recorded in the 4Q06 (margin of
22.0%);
Adjust EBITDA of operational
hedges* totaled R$30.9 million
(EBITDA margin of 26.8%) in
4Q07, an increase of 4% over
adjusted EBITDA of R$29.6
million in 3Q07 (EBITDA margin
of 26.6%) and 27.7% over 4Q06
(EBITDA margin of 22.0%);
Compared with 3Q07, and
excluding operational hedging*,
EBITDA fell 4.2%, due mainly to
a decline in the results of the
Pipes and Fittings division.
Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
18
Net profit and Net margin
Net profit amounted to R$ 7.2 million
in the 4Q07, with a net margin of
6.2%, reversing the negative R$ 2.5
million result recorded in the 3Q07;
4Q07 non-recurring expenses (IPO
and Isofilme aquisition) had no impact
on 3Q07 results.
The Company closed 2007 with net
income of R$5.2 million, despite
passing through a transitional phase
with a large number of nonrecurring
expenses and elevated financing costs
related to the acquisition.
(4,0)
(2,0)
-
2,0
4,0
6,0
8,0
10,0
4Q06 3Q07 4Q07
9.8
-2.5
7.2
R$ million
8.9%
-2.2%
6.2%
Net Margin
19
Nonwoven Segment
Net revenue amounted to R$ 92.7 million in the 4Q07,
a 13.6% growth in relation to the 4Q06, and 8.4% in
relation to the 3Q07;
The Real’s appreciation against the dollar in the 4Q07
(17% in relation to the 4Q06 and 6.8% in relation to the
3Q07), adversely impacted the growth of export
revenue;
Operational hedging* contributed to a reduction in the
impact of this devaluation on the division’s final results.
Volume reached 15,500 tonnes in the 4Q07, 29.2%
up on the 4Q06 and 12.3% up on the 3Q07;
Stronger growth in the export market;
Domestic market growth affected by Isofilme’s
negative performance of 600 tonnes below capacity.
4Q06 3Q07 4Q07
81.6
85.5
92.7
Net Revenue(R$ Million)
4Q06 3Q07 4Q07
12.0
13.8
15.5
Volume(Tonnes Thd)
Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
20
Nonwoven Segment
Fixed costs rose 7.7% in the 4Q07 compared to the
3Q07, due to the collective pay agreement concluded in
November and retroactive to September;
The full incorporation of fixed costs of Isofilme also
had an impact on the 4Q07, compared to the 3Q07 (45
days);
However, fixed unit cost declined 4.5% in the 4Q07
versus the 3Q07, attesting to the Company’s capacity
to increase production/sales and maintain fixed costs.
4Q06 3Q07 4Q07
4.20
3.80 3.75
Unitary Variable Cost(R$ - raw material, comissions and freight)
4Q06 3Q07 4Q07
9.2 9.1
9.8
Fixed Cost(R$ Million)
Unitary Fixed Cost (R$)
0.630.66
0.77
Variable unit costs for 4Q07 were 10.7% lower than in
4Q06, and 1.3% lower than in 3Q07;
Because our contracts with raw materials suppliers
are indexed to the U.S. dollar, the strengthening of the
Brazil real offset upward pressure on the price of resins
in the export and domestic markets;
The cost reduction recorded in the 4Q07 compared to
the 3Q07 could have been greater, if it wasn’t for the
concentration of freight expenses occurred in the 3Q07
and booked in the 4Q07.
21
Taking into account the effect of operational hedging*
in 3Q07 and 4Q07, quarterly results were R$25 million
and 28.3 million, respectively;
Ebitda margin totals 30.5% in the 4Q07, above the
29.2% recorded in the 3Q07 and the 27% recorded in
the 4Q06.
Ebitda recorded in the 4Q07 was 12.2% higher
compared to the 4Q06, and 3.8% higher compared to
the 3Q07;
Ebitda margin stood at 26.7% in the 4Q07, basically
in line with the 4Q06 (27%), and slightly below the
3Q07 (28%), due to the appreciation of the real on
exports;
Nonwoven Segment
4Q06 3Q07 4Q07
22.1
25.0
28.3
Adjusted Ebitda Margin
Adjusted Ebitda (Hedge)(R$ Million)
30.47%
29.24%
27.03%
Operational hedge*: The result of exchange-rate lock forward contracts on accounts receivable from the export market.
4Q06 3Q07 4Q07
6.4
5.7 5.6
Volume(Tonnes Thd)
4Q06 3Q07 4Q07
24.5
21.8
22.5
Net Revenue(R$ Million)
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Pipes and Fittings
Net revenue totaled R$ 22.5 million in the 4Q07, an
8.2% decline in relation to the 4Q06, and a 3.2% growth
in relation to the 3Q07;
Despite the volume reduction recorded in the 4Q07,
net revenue was higher due to the partial pass through
of these increases, and mainly to the product mix, sold
at higher unit prices.
Volume reached 5.6 tonnes in the 4Q07, 12.5% down
on the 4Q06 and 1.8% down on the 3Q07;
Reduction in relation to the 4Q06 is due to lower
demand in the public sector, given than 2006 was an
electoral year;
As mentioned before, both the production and the
sales were affected by problems in the supply of our
main raw material, compared to the 3Q07.
4Q06 3Q07 4Q07
3.1 3.0
3.6
Fixed Cost(R$ Million)
4Q06 3Q07 4Q07
3.03
2.68
3.05
Unitary Variable Cost(R$ - raw material, comissions and freight)
23
Fixed costs grew 20% in the 4Q07 against 3Q07,
chiefly due to wage negotiations with unions concluded
in November, retroactive to September.
Variable unit cost in the 4Q07 was 0.7% higher in
relation to the 4Q06, and 13.8% higher in relation to the
3Q07;
PVC pipes resin, the primary raw material in this
segment, recorded an increase in the 4Q07 due to a
shortage in the product’s supply resulting from
suppliers’ technical problems;
This situation has been improved since December.
Pipes and Fittings
24
Given the income and expense scenario
presented above, 4Q07 EBITDA was 10%
lower than in 4Q06 and 50% lower than in
the preceding quarter.
Pipes and Fittings
25
The words “believe”, “anticipate”, “expect”, “estimate”, “will”, “plan”, “may”, “intend”, “foresee”, “project”, and other similar expressions, are
intended to indicate forward-looking statements. Such forward-looking statements involve uncertainties, risks and assumptions, since they include
information related to our possible or presumed 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 date on which they were made and should not be taken as a guarantee of future performance. Providência is under no obligation to
update this presentation with new information and/or future events .
IR ContactRubens Sardenberg IR OfficerPhone: +55 41 3381-7600 Fax: +55 41 3283-5909São José dos Pinhais – PR
rubens@providencia.com.brwww.providencia.com.br/ir
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