Irani Papel e Embalagem (RANI3) Q2 2024 earnings summary

Executive summary

• Net revenue reached R$393.5 million in 2Q24, stable year-over-year and up 2.6% sequentially, with adjusted EBITDA of R$118.0 million at a 30.0% margin; net profit was R$40.1 million, down 82.5% year-over-year due to a non-recurring tax credit in 2Q23, and recurring profit fell 40.8% year-over-year.

• Corrugated cardboard sales volumes grew 8.4% year-over-year, outperforming the market, while average prices dropped 7.2% year-over-year but stabilized by quarter-end.

• Sustainable Resins segment saw declines in both sales volume and prices due to weak international demand and logistics issues.

• Major investments in the Gaia Platform are largely complete, delivering cost reductions and increased production, though some returns are delayed by market oversupply and higher depreciation.

• The company was recognized for workplace excellence, ESG, and diversity, ranking among top employers and receiving multiple awards.

Financial highlights

• Adjusted EBITDA margin held at 30.0%, consistent with previous quarters.

• Net profit dropped 82.5% year-over-year due to a R$161.1 million non-recurring tax credit in 2Q23; excluding non-recurring items, operational profit fell 40.8% year-over-year, mainly due to higher interest expenses and depreciation.

• ROIC for the last 12 months was 12.9%, down from 14.3% in 1Q24, reflecting recent capex investments.

• Net debt stood at R$1,051.7 million, up 7.2% year-over-year; Net Debt/EBITDA at 2.19x, within policy limits.

• Dividend yield reached 7.97% over the last twelve months, with R$0.74 per share paid.

Outlook and guidance

• Management expects OCC (Old Corrugated Containers) prices to stabilize in 2H24 as supply normalizes post-floods.

• Gaia Platform investments are expected to drive future operational improvements and cash generation.

• Leverage is expected to peak by year-end and begin to decline in early next year as returns from Gaia projects are realized.

• Dividend payout policy targets 50% of net income, with deleveraging anticipated to support future profit growth.