Itausa SA

BOVESPA:ITSA4

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Itausa's conference call to discuss 2021 results. [Operator Instructions] As a reminder, this conference is being recorded. The presentation is available at the company's website at www.itausa.com.br, menu Results center, fourth quarter of 2021. This conference call and the slide presentation are being transmitted via Internet as well. You can access the webcast by logging onto the company's website, www.itausa.com.br.

Before proceeding, let me mention the forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks and other factors.

I inform that the during presentation, the questions can be sent by webcast and be answered at the section of questions and answers. With us today, we have Mr. Alfredo Egydio Setubal, CEO and Investor Relations Officer at Itaúsa; and Mrs. Priscila Grecco Toledo, CFO at Itaúsa. We want to remember (sic) [ remind ] you that the presentation is available at the company's website at www.itausa.com.br, menu Results center, fourth quarter of 2021. It is now my pleasure to turn the call over to Mr. Alfredo. Sir, you may now begin.

[Alfredo Setubal, executive]

Thank you. Good morning for everybody who is participating with us in this conference call about the results of [ fourth quarter ] 2021. For those who are following the presentation, starting with the business environment, we had a good business environment for Itaúsa last year, the economy grew. We could see more activity in most of the sectors and companies that we are invested. So we could use a better growth scenario to increase the business of our companies that we are investing. I think the only thing that was bad, and we are going to see how the economy will perform this year, is the inflation that was very high, above 10%, among the highest in the world. And these take the Central Bank -- took the Central Bank to increase interest rates and probably we are going to see some more increases during the coming months. So we are going to see the reflection of this hiked interest rate, probably we are going to see an economy that probably will not grow during this year.

But anyway, the last year was good. Our companies had a good performance. The bank increased very much the credit -- the loan portfolio. We are now above BRL 1 trillion and credit was an impressive number here in Brazil. We could see growth in our companies, in buying concessions by Aegea, Alpargatas increasing the portfolio divesting. Dexco also increasing the portfolio of companies in participation. Record numbers for Alpargatas and Dexco also, both in revenues, return and EBITDA. So I think it was a very good year, a solid year for the companies that we invested.

In terms of governance, I think we presented an improvement in governance by Itaúsa. We appointed 3 independent members. We create many committees in the Board level. So we have more dynamic meetings now with new members, very active and experienced members of our Board, I think we still maintain a very good control of risk. We are investing a lot in technology here in the company. We changed all the operational systems last year, so we are very updated. We are investing a lot in technology to avoid cyber security attacks. So I think we are in a good moment here -- in the internal moment of the company, with many things happening in terms of controls, in terms of analysis, in terms of increasing our M&A team. So we are very confident and very happy with that.

I think also important here in Brazil, we improved our communication a lot. We achieved almost [ 150,000 ] individual investors -- directly investors of Itaúsa, not compounding these numbers in direct investors through mutual funds, pension funds, insurance companies. So we increased a lot our communication with that big mass of investors that we have through the social media, through the website. We create monthly newsletter to attend and respond most of the questions that we receive from our investors. We did a very important and for the first time, institution campaign in the social media, on TV, radio last year. It was the first time Itaúsa came to the communication, come to the television, social media, saying, Who is Itaúsa? What are the companies that participate? Who are the brands that we have in our portfolio? So it was a very important movement to show Itaúsa to the society more clearly with more transparency.

I think all these led us to maintain our participation in most of the index that are more related to the ESG initiatives. So we are in the most important index in Brazil and outside Brazil. I think it's important recognition that our activity in these ESG segments, [ ESG says ] important things that are more and more important in the view of investors, in the view of the companies, in the view of Itaúsa, of course.

We're going to Slide 10, efficiency capital allocation, I think, is a main issue for us. It's something that we take a very cautious approach. We had Itaúsa buyback of shares. At NTS, we increased our participation to 8.5% because NTS bought back shares from Petrobras. Petrobras sold the last 10% that remained in their hands of the NTS capital and the company bought it back in treasury. So we increased, I think, was a good investment for NTS business.

Aegea, I think we announced the investment of almost 13% in the first semester of last year. Aegea is the private leader in sanitation sector after we bought that stake, that Aegea bought many concessions. And I think the main one was in the state of Rio de Janeiro where we, through Aegea, bought 2 of the 4 concessions that were in auctions. So we became -- Aegea became -- become the most important private company in the sanitation sector.

XP, we received from the bank 15.07% of the capital. We announced since the beginning that is not a strategic investment for us, and we decided in the coming years to sell this stake to use this capital to other investment in other sectors or to distribute to our shareholders. So we are going to use this capital to increase partially the diversification that we have in other sectors. We announced -- we don't want to have companies, only the bank -- Itaú Unibanco in the financial services. So XP is available in the coming years for sale for us. We did the sale in the end of the last year of 1.39%. And most of the result of that was a distribute of us -- interest on capital to our shareholders, that we announced that this interest on capital that were announced last year, the 2 ones are going to be paid on March 11.

Alpargatas also are increasing their capital to face the acquisition of Rothy's, the U.S. company that we bought 49% of the capital. So we are going to allocate around BRL 800 million in this offer using our rights to subscribe the -- and maintain and possibly increase a little our participation in the capital of Alpargatas.

On Page 11, we see important things that happened in our companies that we invested. I think Itaú showed a very important result. We are going to talk a little bit more later about all these companies. I think we have a very important technology investments, very efficiency in terms of expenses. I think we did a quite good job at the bank. And XP also continued to grow its business and we, as I said, sold 1.39% of the capital.

On Page 12. We see also important things that happen in our companies. Alpargatas with the acquisition of Rothy's, I think we improved a lot digital and internationalization strategy of Havaianas and also now with Rothy's. So we think that this is an important movement. And as I said, we are in this period, in the follow-up.

Dexco, the former -- the new name of Duratex, I think we increased a lot the investments that we had in the -- in companies that we had new investments. We, on time and on budget, on our dissolving [ pulp ] project that are going to start to operate by March, by the end of March, probably. So I think good results and solid results for both Alpargatas and Dexco in terms of EBITDA, in terms of revenues, a record number for both companies. Aegea, as I said, bought 2 of the 4 blocks of the concession that were sold by the state of Rio. Copa Energia -- was a year of integration, very important integration by the company of Copagaz and Liquigás, I think was an important year of consolidation.

Going on Page 14, we see in more details, the most important highlights of the companies that we invest. I think the bank has solid results, very good results, very recurrent results. I think the market liked it. Itaú continues to be the top pick by other analysts and investors in terms of banks, traditional banks here in Brazil. I think we are doing a quite good job in terms of digital transformation inside the company and outside. I think Iti is our digital bank now inside bank, we achieved almost 15 million clients, most of them -- more than 80% of them new customers. So that was not customers of Itaú, so very important. We increased a lot of loan portfolio. As I said, we surplus (sic) [ surpassed ] BRL 1 trillion. I think mortgage was a very important one in terms of growth and opportunity for growth also this year.

I think in terms of ESG, we continue to be very focused on that through our foundations, through our commitment to contribute to sustainable development here in Brazil. We committed BRL 400 billion in terms of credit for business. And we did almost 40% of that, BRL 170 billion last year of this commitment of BRL 400 billion that we have until 2025.

In XP, I think XP showed a very good result, a very important growth of numbers, increased the new business like loan portfolio, insurance. I think XP growth of 48% revenue was -- continued to be a sustainable growth and important investment for us. But as I said, it's not a strategic investment.

In the case of Alpargatas, on Page 16, we see that we continue to focus on Havaianas, especially Havaianas in the international markets. I think we sold the record number of pairs of flip flops last year, 31 million pairs sold outside Brazil. Exports already represents more than 30% of the revenues of the company. We did an acquisition of a technology company that we will speed up -- Loasys -- that we will speed up the Alpargatas digital transformation also with new websites and increase the online commerce here in Brazil, outside Brazil. It's a company with 430 employees totally dedicated to digital transformation. So I think it was important.

We divest and finished the divestment period of Alpargatas that had started some years ago, and we finished the investing with the end of Mizuno. Then we sold the brand, and Osklen also that we sold the company. So now Alpargatas will focus on Havaianas only. And now Rothy's that -- a company that we bought 49% that is American company, related to the market of shoes for men's, women's and accessories. So we are very happy and confident in this investment. That will also help to increase our diversification in terms of revenues from different products than Havaianas and also increase of participation in the international markets. It's a growth company, so we are happy that we could have the opportunity to invest in these companies. And also, this will lead us probably in 1 or 2 years to have more dollar revenues than we have today with the growth of Havaianas in the international market and Rothy's also as a company located outside Brazil, especially in the U.S.

I think as I said, we had record numbers for Havaianas, for Alpargatas in the year. It was a very good year for the company. And we are going to subscribe new shares, showing confidence in the business of Havaianas and Alpargatas and Rothy's, the new venture that we are going to grow in the coming years. So very happy with all the performance of Alpargatas.

Dexco, on Page 17, also had a very good year, record year in terms of revenues, in terms of EBITDA, in terms of profits. I think we made many -- we announced many new investments for the coming years in increasing productivity, increasing automation of our factories. A new factory for tires, for the new lines for that business. So we announced the investments in ABC Construção that is a very growth important company in the retail side of the material -- for building material. We announced Castelatto, also new investments that will complement the Dexco line in terms of products in the high-end segment of the market. And new investments through our inventory funds in some important companies that we believe will -- that can grow a lot in the coming years, some of them.

So it was a good year, new investments, new companies, new participations, records in terms of revenue. So was also a very important and good year for Dexco.

On Page 18, Aegea, a new investment that we announced in the first semester of last year. The company is the most important, the biggest one in the area of sanitation, in the private sector of the sanitation sector. We are now at 10% of the Brazilian population that is a very good number and a company that has many investment opportunities through concessions that will come to the market this year and the coming years, to attend the new law that regulates the sanitation sector during these next 10 years.

So I think we bought an important stake. If possible, we would like to increase this stake in the company. But anyway, it's a company that is growing with a very good generation of cash, with very good results. We are very happy to participate in this sector that has a very good, great opportunities for growth in the coming years.

On Page 19, Copa Energia. Copa, it was a year of consolidation of Copagaz and Liquigás. I think was a year of integration, synergies, results. I think the company has a good year. We lose some margin because the price of the gas increased a lot by Petrobras, and we had a delay in passing through the price to customers. So because of that, we have some loss of margin. But anyway, the company is in good shape, this company is growing. Probably this year, we are going to reduce more our debt, that is part of our business plan. We leveraged a lot of the company to make the acquisition of the Liquigás from Petrobras, and the generation -- the cash generation is good enough to continue to reduce the debt that we got last year.

NTS, as I said, bought the -- had a good year in terms of revenues. The revenues grew a lot. The company was able to pass through the inflation to -- in terms of revenues. Net income increased 21%. The company continues to pay good dividends for shareholders. And as I said, bought back 10% of the capital from Petrobras, the remaining stake of Petrobras in the country. So now it's a total private company and a very good one and growing in terms of numbers. And we are also very, very happy with this investment.

Going to Itaúsa results on Page 21, we have a record number of net income, BRL 12.2 billion in terms of results and an ROE of 20%. So also an impressive number, much higher in terms of profits, in terms of ROE when we compare to 2020. Total assets of BRL 74 billion, debt of BRL 3.8 billion, still low to the size of the company. We can leverage more if we have opportunities to -- for new investments. So stockholders' equity of BRL 66 billion. So very solid numbers, very low debt, very good capital structure that we can see on Page 23.

We have -- most of our liabilities are dividends, interest on capital to pay, the debentures that we issued in the last years to face the new investments that we have. So a very solid balance sheet that we have, just 5% of debt compared to our total liabilities and stockholders [ equity ]. So very, very prudent investments.

And we can see on Page 24, the amortization schedule of this debt. This year, we are going to have to pay this BRL 400 million that we have as the first part of -- the first debenture that we issued when we bought NTS. So we are going to pay this BRL 400 million, I think, it's in April -- may, next May, we are going to pay this part of the debt that is due this year.

Dividends and interest on capital. We have always paid back to the investors the dividend received by the bank. We continue to see growth of dividends received by our other companies, by our other investments. But this year, we increased the dividends, interest on capital because we sold the part of the investments that we have in XP. And with the profit we distributed BRL 1.1 billion interest on capital additional for our shareholders. So if we compound this BRL 1.1 billion, we are going to have a dividend yield of 6% last year, what is reasonable when we see the Selic at 6% in average last year.

And to finish on Page 26, we see that we have total assets at market value of BRL 100 billion. Itaúsa market value is 79%, so we have a discount of 21%. It was higher in other periods. We had moments of 28%, 29% of discount. We are now in the range of 20%, 22%, 21% in average, I think. So we think it's still -- the discount is huge. We think all the investments that we have, have very good and nice returns for the shareholders in terms of ROE, in terms of value creation. So we think the discount is still high, and we could see, and we are working hard to show the market good investments, good value creation in the companies that we are investing in. So we think the discount in the -- can be reduced in the coming years. So that's what we have to show and present today, and we are open for questions that you may have about Itaúsa results.

[Operator]

[Operator Instructions] This concludes today's question-and-answer session. Mr. Alfredo, at this time you may proceed with your closing statements.

[Alfredo Setubal, executive]

Okay. Thank you. As we have no questions, I think we continue here to be open in our Investor Relations department. If you want to contact us directly, we will be happy for us. I think we showed good results, solid results for all the companies that we invest in. We are happy with the investments. I think we have good companies and good perspective and good investments, companies that can grow and can continue to show good results and good ROEs for our investors. And we are very confident in the capacity of Itaúsa of creating value for our shareholders.

Thank you for the participation of all of you. As I said, we are open for our Investor Relations department here for questions and take some doubts that you may have specifically about our demonstration of results, our notes and so on in the balance sheet. So if you have any questions, don't hesitate and call us, and we'll be happy to clarify everything that we want to be clarified. Thank you, and have a good day.

[Operator]

That does conclude our Itaúsa 2021 Results Conference for today. Thank you very much for your participation, and have a nice day.