Orsero S.p.A. (ORS) Earnings Call Transcript

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Orsero First Quarter 2024 Web Call. [Operator Instructions] At this time, I would like to turn the conference over to Ms. Rebecca Cancellieri, the Orsero.

Good afternoon, everyone, and thank you for joining us for this Q1 results conference call. For this call, we decided to improve the service together with the tool which allow you to follow the call and look at the results presentation that we're projecting today. And I thank you very much, everyone, for following the call, and I'm going to turn call to Mr. Paolo Prudenziati.

Thanks. Good afternoon to everybody. Before we go to talk about the results of the first quarter, I would like to spend a couple of words in general on the company. As you know, this company has changed totally space in the last 7, 8 years. 7 years ago, we had a company with about EUR 700 million turnover that were EUR 1.5 billion. And we were struggling to achieve an EBITDA adjusted of EUR 35 million to EUR 40 million. Now our goal for next -- this year is between EUR 77 million and EUR 84 million. So this is our -- the number changed. But I think even more important that today, this company is mainly driven by the distribution, fresh food and vegetable. And within the distribution, day-by-day, we play more and more with value-added products. And I think this is very important for the stability of the business product. Having said so, our first quarter, we have to keep in consideration of your assumption. First of all, the economic situation overall in Europe, which is bringing a rather flat or, let's say, in a slow erosion of the consumption in general food stuff and also with fresh food. Second, the expected that we have in our goal for 2024, the expected normalization of the shipping activity, which was spectacular in 2023, and we knew it was coming back to a normal status. Third, some erosion consequent also to the normalization of the shipping business, some erosion of the profitability of the banana business, which was somewhat expected, at least from the quality standpoint of view. And last but not last, we had also some winter campaign, which were not so spectacular, like in the first quarter of 2023. As a consequence, in total, our results are not bad. Our first quarter is not bad because it's showing, as I said, a very nice stability of our business model. And last but not least, before I pass the word to Matteo, is allowing us to confirm the goals that we gave for 2024. Matteo, please go ahead.

Thank you, Paolo, and good morning, everybody. Good afternoon, everybody. As Paolo said, we are satisfied of our first quarter because we, as a company, as a group, we faced different difficult situations. First of all, the market -- the overall market context, the climate conditions that is affecting both our region -- the country or region of our supply and our destination countries and destination markets. And then a general overall economic situation that is not really booming in Europe, so we have to pair with this, let's say, total situation. In this context, the group was able to achieve a good result that was in line with our expectation, both on the shipping side and on the distribution side. As Paolo said, the 2 main, let's say, situation regarding the Q1 are the normalization of the shipping activity and the normalization of the profitability of the banana business. For the rest, each quarter, each month is different in the fresh produce because it's depending on many different factors. But all in all, we had some headwinds on the winter campaign, but we are pretty confident that then we will recover with other campaign in the next months of the year. Going into figures -- the figures. The net sales declined by 2.7%, mostly related to the shipping activity. This decline is related just for 0.9% of the distribution and mainly connected to the banana business. For the shipping, as we said, we had a normalization both on the front-haul freight rate and on the backhaul freight rates, and this was highly expected by us. Going to the profitability to the EBITDA, we had a decline on the distribution that amount -- account for EUR 3.9 million. Here again, mainly related to the banana business effect. Shipping was down by 5.7% and perfectly in line with our estimation. Going on the next page, commenting a bit the evolution of the net profit. We had, in Q1 2023, a record net profit of EUR 13.4 million. That is going to EUR 5 million in Q1 2024, mainly related to the adjusted EBITDA decline, as we commented before. The other main impact that we had is positive because we had a tax effect lower by EUR 1 million. But obviously, if we pair it with the tax rate, actually, the tax rate of Q1 2024 is higher, around 23%, 24% compared with the one we had in Q1 2023. And this is the result of the lower shipping result pairing with the consolidated one. Obviously, as you probably know, the tax regime we had in the shipping activity is the tonnage tax and it's a fixed regime. So once you had a lower impact on the results connected to the shipping activity, our tax rate is getting worse. Anyway, still is a good one. We had no main adjustment on Q1 2024. So the adjusted net profit is almost equal to the reported one. Please go back the next one. Commenting the evolution on the net equity. We grew from EUR 238.5 million to EUR 245.6 million, mainly thanks to the net profit of the period and thanks to the value of the hedging reserve, the positive hedging reserve that we have in our books, thanks to the oil hedging interest rates and the U.S. dollar hedging. All the hedging that we perform are strictly connected with the business, so there's no speculation at all. Going to the cash flow evolution and financial position and cash flow evolution, we are experiencing a seasonal growth of working capital that accounts for almost EUR 12 million. This is perfectly normal for our first quarter because the first quarter is the quarter where we have to book the campaign for the spring and the summer. And so we have many anticipation, payment anticipation to our suppliers all around the world. So net financial position last year was EUR 67.1 million. We had a cash flow generation net of EUR 5.2 million, EUR 11.8 million net working capital change and operating CapEx accounted for EUR 3.6 million. So net financial position, excluding IFRS 16 liabilities, for Q1 '24 is EUR 77.3 million. And IFRS accounts for almost EUR 62 million for a total consideration of EUR 139 million Q1 '24 reported figure. On the work -- then we have a last analysis on the commercial net working capital debt for the period. So we can see how the quarter-by-quarter the working capital flows and actually -- so we passed from EUR 37 million net working capital value end of the year to EUR 49 million end of March. Please, next one. I think -- sorry, the document is completed. But I just wanted to say that given those numbers and our feeling on the evolution of the year, we feel confident to confirm the objective for the full year 2024. Thank you very much, and I will leave the rest of the time for the Q&A session.

[Operator Instructions] The first question comes from Andrea Bonfa of Akros.

My first question is related to actually your mix and the comparison between the first quarter this year and last year. We now know that last year was very good for bananas. So we were wondering if last year, there was also -- there was -- how much was the peak of profitability in bananas in order to take into account the evolution or the sale or the progression of profitability for the current year? So is the worst over in terms of comparison for the profitability of that particular item? Or do we include also likely the second quarter? And then after the comparison is better or how -- if you can elaborate on that.

Actually, in banana business, normally, the first 2 quarters are the strongest one in terms of profitability. Not all the effect -- the comparison effect with last year is related to banana business; but the biggest part, yes. We are not really concerned about the evolution of the year in the banana business because the first quarter was affected as well in general terms, all over the world, by a very bad quality condition of the fruit arriving to Europe. So a portion of this lack of profitability is related as well on quality issues that are totally sold from the beginning of March. But the first 2 months were pretty difficult in terms of quality. So the worst is gone, if worst is the right word. Anyway, once we defined the guidance, we took into account the strong adjustment on the banana profitability. So still, we are perfectly in line with what we imagine, even considering the quality issue that was not considered within our forecast because it was not possible to have a preview on that.

The next question comes from Gabriele Berti of Intesa Sanpaolo.

I think my webcam is not working, sorry about that. My first question regards selling prices. You mentioned in the press release that you're starting to see a declining trend. Is this mainly related to commodity products, categories such as bananas and pineapple? Or it is a trend that you are experiencing also for other product categories? And then if you can provide some indication on the performance of Blampin and Capexo in the first Q.

Okay. In terms of pricing of the product, still we are seeing, all in all, an inflection path, around 3% overall in general terms. If we exclude bananas, mainly related to the tenders with the big retailers in Europe, the rest of the mix is still experiencing a general price increase. Obviously, bananas in the first quarter is one of the biggest items in terms of volumes and revenues because still we don't have any spring or summer campaign. Our sales mix over the quarters is not well balanced in the first quarter because there's a lack of seasonal fruit, and the big volumes that we move are bananas, pineapple, avocados and citrus. So bananas had -- but we knew that and was part of our forecast and guidance. The big retailer chain all over Europe, let's say, there's no exception on that, tried to recover and to negotiate lower price on banana tenders. And this comes with a lower profitability because the pricing region were not declining with the same path. So at the end of the day, we are not experiencing a general deflation at all. Still, we see a very healthy dynamic on the prices. The only exception are bananas, as I said. And obviously, banana in the first quarter has a big weight. So I hope I answered to your question. On Blampin and Capexo, the 2 companies are running well, perfectly in line with our expectation. Thanks -- given to some climate condition in South America, there's a lack of some product lines that are relevant for Capexo. But the final result of the quarter is not strongly affected by that. So still, they are performing very well with strong cash flow generation and profitability. So nothing, I would say, different from last year related to the 2 companies.

[Operator Instructions] The next question comes -- is a follow-up from Andrea Bonfa.

It's just a personal curiosity. I was wondering the range of your, let's say, EBITDA guidance, is that essentially related to higher volumes or could be a better mix? If you can elaborate on that.