Mexico City, October 20, 2021. Grupo Rotoplas S.A.B. de C.V. (BMV: AGUA*) (“Rotoplas” or “the Company”), America’s leading company in water solutions, reports its unaudited third quarter results from July to September. The information has been prepared in accordance with the International Financial Reporting Standards (IFRS).
Figures expressed in millions of Mexican pesos.
3Q21 vs 3Q20 – HIGHLIGHTS
- Rotoplas once again reported record quarterly net sales, which were up 21.4%, driven by greater market share, the launch and adoption of new solutions, and an increase in prices. The price increases occurred after the Company decided to absorb higher raw material costs and maintain competitive prices to strengthen its brand positioning during the first half of the year.
- Product sales increased by 24.2%, with double-digit growth in the three categories: storage, water flow, and improvement. Likewise, Mexico, the United States, and Argentina all reported double-digit growth.
- Service sales represented 4.4% of revenue and contracted by 18.4% due to the lack of revenue in the drinking fountain business as a result of pandemic related school closures. Excluding that business line, services would have grown by 4.1%.
- Gross margin decreased 660 bps to 34.9%, impacted by the sustained higher-than-expected increase in logistics and raw material costs in all regions.
- Adjusted EBITDA1 reached Ps. 364 million with a 12.7% margin, 610 bps lower than 3Q20. Increases in raw material costs remained above the estimated level and were not sufficiently offset by price increases, representing an estimated impact of Ps. 210 million to EBITDA.
- Net income for the period was Ps. 20 million compared to Ps. 38 million in 3Q20, due to a lower operating income.
- ROIC closed at 15.7%, an improvement of 590 bps vs the same quarter of the previous year and 400 bps above the cost of capital.
- In July, GBM released the “Deep Dive AGUA” report with an updated target price of $47.0 and ranked AGUA as market outperformer.
- Coverage was initiated by Miranda Global Research and Miranda ESG, with a target price of $45.0, making Rotoplas the first issuer in the BMV with ESG coverage.
CUMULATIVE 2021 vs 2020 – HIGHLIGHTS
- Net sales grew 31.0%, driven by 22% of the Flow initiatives now being operational. The initiatives are focused on sustainable value generation, such as the development of new products and sales channels. In addition, the changes in consumer habits have driven the demand for water management solutions.
- Product sales increased 34.5%, driven by double-digit growth in all countries and all three categories. Sales from solutions launched during the last twelve months represent 1.6% of total sales.
- Service sales contracted 13.9%, impacted by the lack of revenue in drinking fountains. Excluding this business line, services would have grown 14.2%.
- Gross margin contracted by 410 bps, mainly impacted by raw material and freight price increases and the Company’s decision to absorb these increases in the first half of the year. The margin for the period was 37.6%.
- Adjusted EBITDA1 increased 14.3% to Ps. 1,256 million. The margin amounted to 15.5%, 220 bps lower than 2020 due to the impact on gross margin. Through price increases, 34% of the effects of increased materials costs were offset, resulting in an estimated net impact of Ps. 340 million on EBITDA.
- Cumulative net income reached Ps. 220 million, 81.7% higher than the same period of the previous year without considering the non-recurring financial gain from the closure of foreign exchange rate hedges in March 2020.
- At the end of September, the Net Debt / Adj. EBITDA leverage ratio closed at 1.2x.
- The Company allocated 4.7% of sales to CapEx and has experienced an increase in working capital as a result of accelerated growth and the need to guarantee the supply of materials in a tight supply chain environment.
- Despite the increase in working capital, the cash conversion cycle was optimized by 26 days compared to the same period in 2020.
1Adjusted EBITDA considers: operating income + depreciation and amortization + non-recurring expenses (donations and Flow implementation expenses). In 3Q21 it considers Ps. 75 million of Flow expense and Ps. 1 million donations and in 3Q20 it considers Ps. 75 million of Flow expense and Ps. 4 million donations. Cumulatively, it considers Ps. 225 million of Flow expenses and Ps. 9 million for donations in 2021 as well as Ps. 96 million expense for Flow and Ps. 9 million for donations in 2020.
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