The operating results were benefited by a less severe
winter in North America and by the performance of the other regions in the
first two months of the year
São Paulo, May 21, 2020 – Votorantim Cimentos recorded global net revenue of R$ 2.7 billion in the first quarter of 2020, an increase of 9% over the same period in 2019. The results reflect the stronger market and a less severe winter in North America, in addition to the performance of the other regions in the first two months of the year, in line with expectations. The company ended the quarter with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of R$ 232 million, down 60% compared to 1Q19. Excluding a non-recurring item that positively impacted the first quarter of 2019, mainly related to tax credits due to the exclusion of ICMS (the Brazilian Tax on Commerce and Services) from PIS/COFINS (Program of Social Integration/Contribution for the Financing of Social Security), the adjusted EBITDA for this first quarter of 2020 would have grown by 5% compared to the same period last year. Votorantim Cimentos ended the quarter with leverage, as measured by the net debt/adjusted EBITDA ratio, of 4.76 x due to a mismatch between the extremely devalued exchange rate on the debt conversion date, March 31, 2020, and the EBITDA conversion exchange rate for the last twelve months.
"In view of the global advance of the coronavirus pandemic, the impact on the business began to be felt mainly from the second half of March. The Company implemented its contingency and business continuity plan, ensuring, through liquidity and a robust cash balance, a strong position against current volatility and uncertainty," said Votorantim Cimentos' global CFO, Osvaldo Ayres Filho.
In Brazil, the company's net revenue in the quarter was R$ 1.6 billion, an increase of 2% compared to the first quarter of 2019. Adjusted EBITDA was R$ 116 million, a decrease of 77% in comparison with the same quarter last year, mainly explained by the non-recurring item related to tax credits in 1Q19. The results in the first quarter of 2020 were positive due to better market dynamics through mid-March. According to the National Union of the Cement Industry (SNIC), the cement industry ended 2019 with a 3.5% growth, after four consecutive years of retraction. The projections for 2020 have not yet been updated due to the uncertainties of the impact of Covid-19 in the coming months.
In North America, net revenue was R$ 631 million in the first quarter of 2020, an increase of 52% over the same period last year, mainly impacted by a stronger market and a less severe winter, which recurrently affects operations and results in the Northern Hemisphere. The 26% increase in sales volume, price increases and the depreciation effect of the real also contributed to this result. Adjusted EBITDA in the region was negative by R$ 5 million in the quarter. Despite the drop, it exceeded the results in the first quarter of 2019 by 91%. During the first quarter, North America did not significantly experience the impacts of Covid-19, but some level of decline in cement demand is expected in the second quarter.
In Europe, Africa and Asia, net revenue was stable compared to 1Q19, reaching R$ 403 million. Adjusted EBITDA fell by 8%, totaling R$ 90 million in the quarter. The results were affected by a decrease in sales volume in all countries, mainly Spain, Turkey and Tunisia, due to commercial restrictions resulting from Covid-19, which began affecting the region in March.
In Latin America and other regions, net revenue in the first quarter was R$ 151 million, down 12%, and adjusted EBITDA was R$ 30 million, down 4% compared to the first quarter of 2019. Uruguay did not suffer significant commercial restrictions due to Covid-19 in the quarter and maintained its sales volume, with better price dynamics. Bolivia, on the other hand, saw a more significant impact on sales volume due to restrictions imposed by coronavirus beginning in March, with the suspension of the operation resulting from measures taken by the local government.
Initiatives to Fight Coronavirus
In view of the risks posed by the coronavirus pandemic, Votorantim Cimentos implemented a series of preventive measures in all its operations, such as reinforcing the sanitization and cleaning of workplaces and chartered buses, changes in the routine of company cafeterias, guidance to drivers, use of thermometers in the production units, suspension of business travel, telemedicine technical support, psychological support, guidelines on working remotely and technology tools for all administrative and technical support areas, among others.
"All measures we have taken are focused on the health, safety and well-being of our employees, family members, service providers, partners, customers and the communities where we operate," said Ayres Filho.
In the production units, the Company is maintaining a reduced staff, with increased attention to prevention. In the concrete operation, the branches continue to operate with a smaller number of people to assist construction projects underway, to ensure supply to customers. Votorantim Cimentos continues to monitor the situation on a daily basis in all units to assess risks, and new measures may be taken at any time.
Votorantim Cimentos announced the creation of a fund with its own resources to support communities surrounding its operations in Brazil. The fund, which received an initial investment of R$ 5 million, will evaluate requests from institutions, associations, NGOs and other public and private entities located in the municipalities where the company operates.
In April, Votorantim Cimentos announced its participation in the Não Demita ("Do not Fire") movement (www.naodemita.com), through a public commitment to maintaining its current workforce in Brazil through July of this year. The company also created the VCajuda ("VChelps") portal (www.vcajuda.com.br) to train and support small and medium-sized retailers in the construction segment using relevant content and digital solutions to help them set up online sales channels during this Covid-19 pandemic.