Q2 2021 Iguatemi Empresa de Shopping Centers SA Earnings Call
Okay.
[music].
Then Marty you there 1 on thank you for weighted.
Welcome to regret to me.
Thanks.
Second quarter.
21 days.
With us here today.
Hello, Good day.
Well Ms Christina <unk>.
<unk> Investor Relations.
Well, we'll let portfolio that this event is being recorded on all.
I suppose will there be any state on them during the company's present day.
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Before proceeding let me mention that forward looking statements are based on beliefs on sand.
I'll go out on these management and on.
On information currently available to the company.
They involve risks uncertainties and assumptions because they relate to future events.
Therefore depends on circumstances that may or may not occur.
And then lastly, you.
You should understand that general economic conditions industry.
Our nation and other operating factors could also affect the future results of the Japanese are good call. These results to differ materially from those expressed in such forward looking statements. We will now give the floor to mistake colors in Asia.
I will begin today's presentation.
Mr. <unk> you May proceed.
Hi, good morning, everyone, it's a pleasure to.
Welcome to you once again to our conference call.
Today, we are going to present the results.
Second quarter of 2021.
Yes.
Some of the highlights.
After a very good flow momentum.
<unk>.
Animal segment, and we are closed clouded with encouraging results.
Okay.
And it's been recovery now number, especially in May and June.
Simple when sales were close to 100% compared to pre crisis levels.
Give you a highlight also when you're on.
Thank you.
For July.
5%.
So it's COVID-19.
9 of our malls are positive.
Patrick Carroll.
Craig It's Peter.
Meaning that you know I.
I think the worst.
Re behind and we have seen positive numbers backing our interest, especially now on a malls.
Any observations about retail.
Vince and Dave.
On the coming months.
We know that the C&I continues to require attention.
Second quality on our capacity utilization and the number of hours currently operating divided by the number of regulated operating hours.
On to 76, 3%.
On the easing of restrictions.
Our industry.
Currently we are operating 100% of our malls on our sales yet.
Schedule.
Yes.
The highlight that I am going on.
Lane on reaching like 90% on a 90%.
May and June.
And June also we announced a corporate.
Relevant innovation process to unleash new growth opportunities.
Operating is underway and we are now define democracy at each in your phase <unk>.
Really as part of our measures to reinforce corporate governance, we announced that as of January 2.
Thank you Christina.
Cristina Betts, our CFO will become the company's CEO.
I will focus exclusively on the board of directors.
We also finished ex Spanish welcome interest 65, our ecommerce, which now covers the income.
On a national territory with deliveries to all state capitals, besides adding new important brands, such as Pat and Scott.
Michael Kors.
Today, we just announced <unk> as silly as being very strong.
On growing out collection portfolio.
Our marketplace continues to be 1 of our best and have the best sales, resulting cost tripling the website traffic in June 1 we reached more than 100 million, we reached more than 1 million unique visitors.
So that's an impressive number for accretion that is 1 point price.
Just 1 year in a few months old.
So I'm very bullish about the growth of our 265.
The next months and years.
No.
We plan for the second half.
Plains interest expenses second half include launching all day.
265 App.
And we are opening a pop up store all senior growth can be some follow on our largest low.
Other than 500 square meters.
Uh huh.
We will also.
Also we are promoting the integration risk relative to your 1 hour.
Royalty program.
These reinforce our focus on the sustainable growth of the AUM in your channel business model, bringing together the excuse me on <unk>.
Retail.
Always paying attention to innovations.
Our customer experience.
I would now.
Just a few highlights that I want to show you that before.
Passing to Christina on your operating accretion status as I mentioned.
On May and June on <unk>.
<unk> III, we already are operating at over 90%.
And getting better.
The main capsules that we our market share.
<unk> announced that they will.
Yeah.
Open up more and flex.
But you have more room to accomplish it in rates.
The restaurant level.
Get better.
Occupancy so on and can have a better use of restaurants.
<unk> for the next months.
And I appreciate your thoughts on debt, where we use the capacity.
Like I mentioned on over 90% and sales are reaching almost 100%.
So we're very bullish on what next master come with resilience.
The country not leaving.
So other countries as well as our schools.
Schools.
On presents potential so we have more people on the Cds more traffic.
And so we.
Deeply believe that in the next.
So we will have positive sales.
As well as less restrictions.
This will improve even more I'll say over the next months to come.
When we have the.
The results highlight we have as I mentioned for the second quarter goes on.
To win 21.
The average capacity utilization of reaching 7 to 6.3% total sales, reaching $2.7 billion.
Up to 354% through 2020, but when.
When you look at <unk>.
2019, we are now wanting to 91% when you exclude the malls.
We showed in 2019, we are only down by 16, 6 just shows that.
Going back to normality.
As I mentioned July was even better.
Youll see more and more.
In fiscal credits going back to normality.
As restrictions are.
Uh huh.
We have some store same store sales decreasing by $14.5 percentage as a matter of sales decreasing by 16, 6% in the quarter.
But it's also it's worth noting that 7 out of our 60 malls.
Positive territory.
And then when I mentioned about July 9 of our malls were positive so showing that we are growing back.
Back to normality.
<unk>.
Scott.
In Brazil, the same store rents grew by 2.8% and same area rents fell by 7.1%.
Gross revenues reached 228 million.
We have like 42, 6%.
Last year's quarter and up 6.6% over 2019.
We had net revenues, reaching $107 million up to 5.8% and down by $9.3 over the second cracker on 19.
When excluding straight line effect on <unk>.
Debt closed at 106.
100.
$6.4 million.
Up to 171% over last years, and EBITDA, reaching $108.9 million weighted to quantify them down by 5.4% with.
Southern 'twenty.
When we that was the period that we started using the straight line method.
Our margin was 63, 9%.
In the period.
Net income totaled 279 million.
Up to 500%.
And we've explained.
These positive effects.
No.
Presentation <unk> regime.
$317.7 million.
In the quarter up 279%.
Our leveraged standard in the quarter to 2.
2 times.
Net debt EBITDA.
The net debt over EBITDA debt.
Down 0.6 weeks.
This is a utility.
1 off.
Effects.
<unk>.
In fact wellness.
Deal that we did helps a lot on our.
To reduce our leverage coverage restriction on June 7th.
Analyses.
As I mentioned the restriction.
For the corporate restriction between you guys and easier to touch class vessel that is well known.
<unk> so far.
We'll also be analysis yields session casino path as I mentioned before.
<unk> CFO will take over as heal by beginning of the year next.
Next year.
IPO as E Commerce again.
<unk> helped a lot to our results on the profit, but can be recognized in the quarter capital gain of 288 net debt.
The lines that boosted the.
In fact on the on the net income.
<unk>.
The deleveraging of our.
Of the company, we have the dividend payment announced a $50 million is approved.
Agm's retained to installments.
As simple.
Sequence of events, we have had also.
Copper restriction approved by.
<unk> bye.
By 98, 9% of the votes.
When we created the <unk>.
Dividend commodity that we negotiate exchange rates as of the corporate restructuring.
We had the issue of 500 million in debentures.
And also we announced the U.
<unk> CFO.
Lots of knee equally theater, we're taking place on Christina.
As the new.
CFO.
Already in August.
Ah projects Green Cross and progress we have the <unk>.
Scheduled to be completed at the end of this year.
In December.
We have 52% of this project.
It's supposed to be 1 on the best corporate office tower in the city of <unk> <expletive>.
Pi added here and there.
Floor to Christina.
Talk a little bit more about the operating and financial results of the second quarter 2021. Thank you.
Hi, good morning, everyone and thank you for being in our call.
So straight into slide 12.
You'll have noticed that our exceptionally this year on this quarter, we decided to compare against the second quarter of 2019.
It's really second quarter of 2020.
It comes from.
We used some really strange numbers so.
Looking straight into the second part of the chart.
Just as a comparison.
On reminder.
In 2019, we had the sale of 2 loss.
After the second quarter, which was exactly you put on all please anybody for any cash yes. So when we look at the table, we see a decrease from 18 to 16 malls.
And in total sales a decrease of 21.8% so from $3.5 billion has $2.7 billion.
And if we exclude the 2 walls.
Florida on all please on cash year.
The drop would be a 16, 6%.
Same store sales.
Our income passengers to 19 were down $14.5 same area sales $16.6 what same store rents were up $2.8 at the same area rents down 7.1.
When we think of occupancy costs were almost back to normal.
1.8% versus $11.7.
Occupancy rate a little lower considering the chart on the pandemic and.
Our belief in and putting in early what we believe is a store that will be adequate for them also 19.1, and we have a strange net delinquency number of negative 4.0, and this is because 2 well 2 reasons.
On a what we charged in March for March and at which we tried to.
And the subsequent month April we postponed that receivable to be paid in 5 installments as of October exactly what we did in March of last year because.
Because it does appear that we are we went into the second lockdown on the second thing of course as Carlos mentioned, we have fantastic sales in May and June.
Which helped our delinquency rate come down. So we are beginning the beginning of the month. When we started the first charge of of of rent Cam and marketing at <unk>.
Lower delinquency rates and the month at a very much lower end and almost at single digit now. So so again I think everything is improving.
In terms of of collectibles.
Collectibles are the rents as well.
Moving straight into page 13 on looking at our P&L and again comparing to 2019, we have gross revenues coming in at 228 million hives at 6.6 because that increased basically due to the increase of the monetary correction of the contracts of course taxes on discounts on increase of 100.
30% on here because of of comparing to 19 or with no pandemic.
The increase basically due to discounts I.
Remember that we have the straight line effect that we started implementing as of the second quarter of 2020 at all on I will talk about the straight line in fact on the minutes and the next slide net revenue is close to 117 made it. He is a decrease of $9.3 and EBIT came in at 109 million. He is a decrease of 20%.
Financial revenues and expenses came in at an exorbitant number 365 million Hi. This is why we have the effect of E.
E Commerce investment Mark to market. So this is an investment that we made in 2019.
And we've played it.
N and M S as cash on hand, and a fund at the Ipos in the second quarter, and we mark to market that position, giving us an extraordinary gain on that position on.
And of course, the income tax and social contribution which increases because of the effects also the financial revenues.
Net profit coming in at 217.9 million high.
An increase of 500% versus 2020, and an increase of 264% versus 2019 and of course, the accompanying that things are progressing.
When we look on page 14, we can see the P&L without the effects of day linearization. So just straight into maybe the numbers that that that are really make a difference here when.
When we look at net revenues in 2021.
They came in at 167 million highs and when we compare that to 2020 numbers. It was 71 million high so an increase of 136 million half makes total sense now because when we compare remember it last year.
We were basically shut down.
<unk> for the whole of the quarter. We just began reopening the malls at the end of June and we did not charge rent for April may and heavily discounted in June so of course net revenues when we exclude the linearization effect has this enormous growth in.
In 2021.
And of course on EBITDA margin underneath it goes from 106 million high end compared to 2020.25 million high system. So therefore, an increase of 325% okay.
And of course, the whole thing filter through the rest of the P&L, but those are the 2 numbers I think are mainly affected by the straight line effect that we adopted in the second quarter of 2020.
On page 15, we have the gross revenues.
And how they how they behave so looking at the quarter, we have rents increasing at 18% management fees, increasing at 50% parking at 540, <unk> almost 540% on.
Other I forgot to June 30 of course again, we're comparing it to 2020 Uh huh.
It's an unfair I'll say comparison because of course, we were basically in locked out in 2020, but.
But the rest of course, what we kept driving that AR and AR.
It does not this is gross debt doesn't include discounts. That's why we have to increase the rents as well.
When we look at the breakdown of the rents we see minimum rents increasing on an ex pages to page 16 at $8.6 overage, increasing 206, 64% at a temporary rise increasing 142% in the quarter okay.
When we look at costs on page 17.
We see that our personnel have decreased 10.1.
Just as a reminder.
In August last year, we had a significant reduction in head count in Cam and in the company as well and the holding company and this is the reflection of that.
Duction that happened in the third quarter of last year and therefore, the comparison for this quarter, we have the decrease third party increasing.
497%, it's a small number so I remember in second quarter, we did away with all off of everything we could cut in terms of suppliers and here, we're coming back to what would be normal.
Promotional funds again, we had massive discounts on the second quarter of last year. This is why we have such a big increase on parking slightly lower again because of this actually structural decreases here as well other increases of 184% because of the operations that we have in.
He brought to me 36, 5 E Commerce platform, but also in the retail division that we have called I retail.
When we look at expenses on the next page, we see personnel, increasing a 170%.
Share based compensation, 2% third party at 42 on other <unk>.
At 9 Okay, basically when we look at expenses.
The increase in personnel is not the head count of course, because we are as Ive said, we did have we had a significant reduction in head count in August of last year. What we did do last year was that we decided.
So the difference here is because we are providing for variable compensation regarding 2021, which should be paid out in 'twenty 'twenty 2 okay share based compensation slight increase because of the the new grant that we had this year third party going back to normal so at 42 and that other decreasing appetite.
When we look at page 19, we have the debt profile of the company. So total debt came down to 3 billion has a decrease of 6% cash.
Cash and cash equivalents went up.
10%, so net debt cash came.
Came in at $1.3 billion has a decrease of 22%.
Bad debt at 506, our Rolling 12 months comes to a net debt over EBITDA was 2.56, a significant reduction.
Over the first quarter of this year, which was 3 points to 726 cost of debt slightly lower at 124% of CDI and the average term pretty stable and this does not include the lost our issuance of debentures that we had in July.
Super comfortable a table of our amortization, we already advertised a significant portion of our debt. This year already in the beginning of the year on this new debenture will help us amortize.
The remaining periods, especially twenty-three on 24.
Finally, the last slide looking at our debt profile. We continue much the same basically focused on CDI.
It'll bit of our debt NTR and in terms of the breakdown of the different modes of our debt.
You know sort of equally weighted between the AR receivables and the debentures, we have some real estate credit and some other lines on.
Very links to the leaky as we can see on the slide below.
So with that we finish our presentation and we're open to any questions. You may have thank you.
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From Morgan Stanley would like to make a question.
Okay.
It's all bad debt from Goldman Sachs. Good day as President.
I would like to make a question.
Hi, good morning.
Christina and Carlos Thank you for the call a couple of questions.
On the occupancy rate.
Kind of remain flattish a little bit down on the quarter.
Do you think you can bet that gets back to pre COVID-19 levels at some point how long if so how long do you think it would take to get there and then how should we think about the leasing spreads.
We cover on the occupancy rate.
Thank you.
Hi.
So occupancy I think are 1 of the things. That's happening now is that of course, you know, it's kind of sad theres been a lot of renewed interest we've capped.
Interest on the Guy that has signed on for this year and because it's a second lucked out there were slightly delayed.
But everybody has maintained their contracts except that they they will initiate the operations a little bit later on.
But we had a surge of new interest from different tenants local and international and sales of some new luxury brands also having conversations with us about opening up new new stores.
Ah. So so I think that's really encouraging I think the second thing that we've been discussing also is that of course, we're looking forward.
I think we're very positive on the outlook for the second for the second half of the year because as we said we've seen may and June having fantastic sales and actually very different from last year much more across the board on the different categories and so on and so we see this as a positive move we've always seen this in July as well.
Which isn't really great because remember July is a month for sales and so on and change of collections and to have this positive number in July is really good news. So we haven't we have a really positive take on on the second half of the year, which means that all of this renewed interest people will be accelerating to pick on to be able to participate let's say.
In this takeoff of sales for the second half of the year. Okay. What's happening of course is that there is a.
There is a.
A big discussion on the leasing spreads as you very well.
Question, because we feel that because everything is improving and coming back to you know as you know we've shown that already we're almost back to normal in terms of total sales and on all our and our and we think that the appropriate level of leasing will be the leasing debt.
The the spreads that we have pre pandemic.
So theres a bit of a cushion.
Push and take here with the new leases because of of what we think is is adequate.
And we are pushing out for you know keeping exactly the same kind of leasing spreads that we think are appropriate for the kind of sales that we're seeing.
So there is a little bit of of you know our normal pushback here.
But I think nobody would want to miss out on the second half of this so we look very possibly on occupancy going forward. Thanks.
I think that's a difficult to say what will reach pre pandemic. So before it just before the pandemic hit we were at about 93%.
That's not very far I think we have enough interest in normal debt that I think we're confident that we should be reaching that within the next let's say 6 to 12 months.
Okay. Thanks, Kristina that's helpful and maybe a follow up on that day in terms of your occupancy costs also little bit above pre pandemic levels.
Recovering as you kind of the sales come back a bit.
As you recover on the occupancy rate as well.
Yeah definitely because I think it goes with the.
The increase in sales as you said Ah, but also in terms of you know because we've been very very strict on all of the increase of Cam on marketing are the only thing that will increase together with sales of course is the rent because we are still at a heavily discounted. So we will continue to be super strict on Cam and Mark.
And then as we see our opportunity as sales improve removes the discounts as we go along okay. So we shouldn't be back because at $12..8 really are really not worried anymore. Because you know our normal level of EBITDA.
Hi, 11 kind of thing you know so so we're very close now.
Okay perfect. Thank you Christina.
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Yeah from Morgan Stanley would like to make a question.
Good morning, Carlos boots increasingly sections so.
Personal shopping consumables. So it's very clear that we are seeing a recovery.
Coming back on mute.
At the end of the quarter net lease.
Receivables increased 25% sequentially have you hit 235 million Brad.
So I understand there's a bit of a timing issue here Steve.
And do you feel now and get it later, but I wanted to see if you could provide some color on how you view these receivables collectability.
See a material decline to vs receivables at puberty for buses and then my second question is around the balance sheet. So.
Sure.
I understand that correctly and we.
We think.
The price increase and as you all wanted to get a sense of how you will be balance sheet items right. Now do you think you'd get more exposure to yard or any.
Any other index. So just any color you can provide day. Thank you.
Yes.
Sure Al.
Debated back.
So on the receivables I think the first thing to realize for this quarter is that of course, we postponed the March rents, which were charged in April. So we are carrying a full months of rent in the accounts receivable, which we are only going to begin to collect as of October which is kind of similar to what we did.
Last year, Okay, but when you look at the quarter on first quarter comparing to second quarter. Then of course, you have this dramatic increase because of the 1 launch that you carry in the receivables net.
Of course, the delinquency rate has been higher okay as well so of course, the receivables is impacted by the accumulated effect of the 1 year on a half of all on 1 year of Pandemics.
Are just over a year and.
So that's been that's also in our accounts receivable, but as you know as we so the negative delinquency rate. This quarter, we've been successful and actually receiving part of that and that comes from increased sales of course, so I think that as we move into the second half of the year.
And we you know I don't see you could say if we see continued performance like we saw on May June and July.
We'll be able to collect a lot more of these are past due rents because we always say in our company that the cure to all evils. In this company is have increased sales. Okay. So as we have this increased sales going forward I think a lot of the tenants will look to who pay down there that there are overdue.
Rents okay. So that's they they keep their positions at all okay.
So that's why the receivables on the balance sheet and the debt.
I mean, we've been carrying and almost all CDI debt.
For a long time now and.
Who says that we've benefited from this tremendously I mean, we observed this wave of the really stupidly low CDI for such a long time.
Thank you know on ink and increase of CDI is going to really affect any materially and all of our decisions.
Of course, we're always looking to exchange debt profile as things move.
But even when we have a portion of our debt actually increased and pre fixed and fixed rates as well.
But it's very small and of course everything is always price day. So so it's a it's not so easy to because it's very volatile too to get the right moving into changing.
I think we've you know the new debenture shows it's also CDI, but also at really low spreads and really long rates. Considering you know what you know the the actual market in Brazil now so I think you.
You know a few basis points is is easier to carry than having shorter shorter term I think our intention is to of course keep.
Looking for the best office, but increasing this.
The average duration at the you know as we are today, we don't have to worry about rolling over debt in the next 2 years, which is really key for us because next year I remember it's election year, it's always a very very volatile year.
So so for us to have that peace of mind is is a very important and not do anything rash in terms of of exchanging debt. So I think we're okay on the debt side as well okay.
Very clear day, Stephen Thank you.
Thanks Dara.
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Thank you ladies and gentlemen, there are no further questions at this time.
Hi, This is Matt.
Proceed to closing remarks.
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Just to thank you for participating on on this conference call and feel free to ask any questions. If you have any further questions.
Relationship. Thank you very much.
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