Dexco (DXCO3) Q3 2024 earnings summary

Executive summary

• Strong performance in the wood division and LD Celulose drove significant EBITDA growth, with LD Celulose contributing 49% of pro-forma EBITDA and achieving record results through high productivity and cost management.

• Metals and sanitary ware division results stabilized, with volume and mix improvements, and the company announced its exit from electric showers and taps to focus on higher-value segments.

• Tiles division recovered volumes but remained pressured, with EBITDA close to zero due to market instability and high inventories.

• The company is nearing the end of its 2021-2025 investment cycle, with major projects in tiles, metals, and forestry nearing completion and a focus on deleveraging.

• CEO succession was announced, with a structured transition planned through April 2025.

Financial highlights

• Adjusted and recurring EBITDA (pro forma, including LD Celulose) reached R$676.7 million in 3Q24, up 47% year-over-year; YTD figure was R$1,792 million, up 24%.

• Recurring net revenue increased 24% year-over-year in 9M24, with recurring net income for 3Q24 at R$125.1 million, up 32% year-over-year.

• Free cash flow for 9M24 was R$146 million, up 37% from 9M23, with working capital at low levels (~15% of net revenue).

• Market capitalization at quarter-end was R$6,911.5 million, with a share price of R$8.55, up 11% year-over-year.

• Net debt at quarter-end was R$5,214.7 million, with net debt/EBITDA (LTM) improved to 3.10x.

Outlook and guidance

• Wood panel market outlook remains strong, with high factory occupancy and healthy competition expected to continue.

• New ceramic tiles factory in Botucatu to begin operations in 2025, supporting future growth.

• Company remains focused on optimizing operations, capturing returns from recent investments, and reducing leverage.

• LD Celulose dividend payments to shareholders are scheduled to begin in 2026, with potential for acceleration if performance remains strong.

• Scheduled shutdowns and rising interest rates in construction may impact the Finishing Division.