Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Armac Locacao Logistica e Servicos SA (BSP:ARML3, Financial) reported a 12% year-over-year growth in gross revenue, totaling 482 million reals.
- The company successfully extended the average payment term with suppliers by 29 days and reduced the average collection period from clients by 25 days.
- Operational cash flow was strong at 346 million reals, driven by significant improvements in working capital management.
- The company has developed a new competence in asset maintenance, allowing for efficient capital recycling through re-renting or selling assets.
- Armac Locacao Logistica e Servicos SA (BSP:ARML3) has a solid captive structure, enabling it to continue its efficient journey and resume growth without needing to access external capital.
Negative Points
- The company experienced a drop in productivity and utilization rates due to heavy rains and postponed infrastructure works, with the lowest rates in the last five quarters.
- Adjusted rental EBITDA decreased, with a 25 million reals reduction compared to the fourth quarter of 2024.
- There were 11.4 million reals related to non-recurring events, including a bad debt provision for a single client and restructuring-related expenses.
- The company is undergoing a demobilization process, which is expected to create temporary noise in 2025 results, including temporary revenue drops and increased idle fleet.
- The net cash income was negatively impacted by lower EBITDA, higher financial, and depreciation expenses compared to the first quarter of 2024.
Q & A Highlights
Q: Have you mapped out the contracts likely to be demobilized in the second quarter and the rest of the year, and what is the value of the fleet that can be demobilized? Also, could you discuss the provision for bad debt and what happened with the client?
A: Yes, we have mapped out operations to be demobilized, amounting to about 150 million reals in assets. Not all agreements were demobilized in March, but the total revenue value of these contracts is approximately 120 million reals annually. Regarding bad debt provisions, the impact was limited to a single client. Despite having material collateral, we prefer to be conservative and provision the total amount until we have clear visibility. We do not see any other clients posing a risk to our portfolio, and the default rate remains very low. - Marcos Pineiros, CFO
Q: Is the first quarter the bottom in terms of margin, and can we expect sequential improvement towards the 51% margin guidance by the end of the cycle?
A: The first quarter is the beginning of our journey to restore profitability. It may not be the bottom as we have ongoing adjustments. The second quarter might be affected by one-off expenses related to these adjustments. We aim for a 50% margin, and actions are being taken to achieve this. We expect improvements in the third quarter, and our focus is on efficiency and capital utilization. - Marcos Pineiros, CFO
Q: How do you see the sales conditions for semi-new products, considering high interest rates and investment intentions?
A: Our asset sales structure started after going public, meeting actual client demand and creating value in a niche market. Despite high capital costs, we see this as an opportunity for growth. Our stores are strategically positioned, and we offer guaranteed origin for our assets, which adds value. We don't foresee difficulties in asset demobilization despite market pressures. - Fernando Arragao, CEO
Q: With higher demobilization, what can we expect in terms of CapEx for expansion and maintenance? Also, how does this relate to asset sales margins?
A: You can expect a net-zero expansion for the year, considering asset sales. The 42 million reals for maintenance CapEx will continue at a regular pace. We aim to maintain asset value through efficient maintenance, which supports lower depreciation. Specific asset sales margin disclosure isn't planned, but asset sales are crucial for capital recycling and business model leverage. - Marcos Pineiros, CFO
Q: Why do you feel comfortable with more exposure to simple rental contracts, and what explains the favorable competitive environment?
A: Our comfort comes from restructuring sales channels and understanding market segments' lifetime value. We've identified resilient segments with essential economic activities. Post-IPO, capital entered the sector without adequate caution, leading to some competitors facing financial difficulties. This has made the competitive environment more favorable for us. - Fernando Arragao, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
