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Good afternoon, and thank you for waiting. Welcome to Unipar's conference call regarding the results of the third quarter 2020. Today with us, we have Mauricio Russomanno, Chief Executive Officer; and Christian Schnitzlein, Chief Financial and Investor Relations Officer.
We inform that this event is being recorded. And all participants will be listening to the conference call during the presentation of Unipar, then we will start the Q&A session when further instructions will be provided. [Operator Instructions] This event is also being broadcast to attendants over the Internet via webcast on the MZiQ platform, which can be accessed through the company's website at www.uniparcarbocloro.com.br/ri in which you can see the presentation. The selection of slides will be controlled by you. The replay of this event will be available shortly after its close.
We remind you that webcast participants will be able to register by website questions for any part that will be answered during the Q&A session, or even after the end of the conference by the IR department.
Before proceeding, we would like to clarify that any statements that may be made during this conference call regarding Unipar's business prospects, projections, operational and financial goals are looking at assumptions of the company's management as well as information currently available to the company.
Forward-looking statements are not guarantees of performance and involve risks, uncertainties and assumptions because they refer to future events and, therefore, are independent on circumstances that may or may not occur. Investors and analysts should understand the general position of industry position and other operating sectors may affect the future results we are and may see the results that differ materially from those expressed in such future conditions or statements.
I'd like to give the floor to Mr. Mauricio Russomanno, who will begin the presentation. Please, Mr. Russomanno, you go may proceed.
Thank you, operator. Good afternoon. To start the report of our third quarter 2020, I'd like to briefly make a retrospect of the second quarter 2020. The beginning of the pandemic in Latin America started in April. We had a drastic stop in activity in most economic industries. The impact to Unipar according to results was [ incubate ]. We maintain stable operations since we produce chlorine and soda. Both are essential product, the first with an application to water treatment and hygiene; and the second, food, pulp and paper and personal hygiene. For the [indiscernible] the production of soda and PVC were very much impacted because of the significant reduction of civil construction and maintaining resilience to the medical use of PVC. So those sites ran well below their capacity under regime that we call stop and go. This was done so that we could meet the demand of soda. And at the same time, we ensure the management of inventories of PVC that grew a lot considering low demand. At the end of the second quarter of 2020, beginning of third Q 2020, we noticed a quite significant increase of requests or PVC called by the resumption of construction works as some restoring projects, people realized they would remain [ in shock ] for a long time, many decided to solve the problems or make improvements.
And second, our construction works that are mid, large size projects that needed to catch up on their schedule and because of the stop or the shutdowns in the second quarter. So the recovery in the third quarter was better, and it maintained over the quarter. In this context, I'd like to highlight the following points regarding Unipar.
We had an excellent operational performance over the quarter. At the Cubatão site, we see it is a great performance since the beginning of the year, with a use of 82% of its capacity and meeting the needs of the market in terms of soda, chlorine and derivatives.
In Santo André and Bahía Blanca, we had very high performance, much higher than the previous quarters and the historical average. The capacity rate reached 89% and 78%, respectively. And this is quite a significant increase regarding the third quarter of this year. I'd like to highlight that the improvement in the operating or operational performance was because of the improvement in terms of reliability and productivity of those plants.
Availability of product considering operational performance of mine to the image reform in the second and third quarters allowed us to meet the demands of -- the high demands of our customers while the international proprietors of PVC recovered after a great drop in the previous quarter, which helped us increase our net revenue.
The situation across the third quarter with low demand, which led the prices to go back to be pressured by the U.S. market and ultimately, reflected an impact in our region.
To highlight some initiatives in ESG over the period. First, we had the continuity of the activities of the Crisis Management Committee of COVID-19 that we set up in the second quarter. And the goals were to avoid our associates to be contaminated; ensure operational continuity; and that we support our employees, society and community throughout the crisis.
This committee is still active and Unipar is still working with strict protocols and procedures as well as all the initiatives that we developed throughout the second quarter -- second semester of the crisis. We created a project called [ ballast ]. That is a project that we support our associates and their families, providing physical activities, activities to manage stress, mental or physical health, interest clubs, et cetera.
Another thing that I'd like to highlight is that on the 3rd of September this year, Unipar completed the constitution of a joint venture with shared control with AES Tietê for renewable energy generation, wind power. So this is the first project in energy. In social development, we had our first group of the [ Bispard ] project, whose goal is social professionalization education for young people between 16 and 19 in the surrounding community at the plant. The syllabus includes technical knowledge, personal knowledge and citizenship skills.
We also give continuity to our new engineer development program. We started a new group with 8 new recently graduated engineers. In our activities of the Community Advisory Board, we've maintained it by a large virtual dialogue addressing themes regarding communities, and the projects that we had. In this quarter, we've also made the decision of sponsoring 10 social and cultural projects. And we estimate the impact will be that over 6,000 people benefited by these projects. Another theme that is quite important is the renewal of certifications. Unipar was the first company that is a signatory of the responsible care. We had an audit and recertified in this program.
We've also recertified the company in the ISO programs, 9001 Quality Management System, the ISO 14001 Environmental Management System and ISO 45001 Occupational Health and Safety Management System.
To complete, I'd like to stress that 11th November 2020, we had the Board of Directors approving the prepayment of dividends related to the fiscal year of 2020, amounting to BRL 72 million. On the same date, we had the approval of the second amendment to the second buyback program. And it will expire on the 13th of November 2021.
I'd like to give the floor to Christian Schnitzlein, who is our CFO.
Thank you, Mauricio. Good afternoon, everyone. For those who are following on the presentation, I'm going to go over the financial results of the company on Slide 5.
Consolidated net operational revenue shows relevant growth considering second quarter 2020, supported by international price decline. We had an increase in the sales of PVC. In the chart, by product, PVC had an increase in stake in the revenue in this quarter considering previous quarter. Likewise, COGS had an increase of 45% considering second quarter 2020, also justified by the increase in consumption of imports and the consolidated business moved from 65 to -- BRL 136 million to BRL 315 million in the third quarter and the parent company rose from BRL 65 million to BRL 211 million in the third quarter. Consolidated net profit was BRL 156 million in the 2020, impacted by the foreign exchange evaluation that impacts our debt that we have. In the accumulated of the year, we have net revenue of BRL 81 million. On Slide 7, we show net -- consolidated net debt. That has a negative excess for the company. The parent had 0.69% (sic) [ 0.69x ] of EBITDA of the past 9 months. This is explained by the investment we made of BRL 35 million in the JV with AES Tietê as Mauricio has mentioned and also for allocating CapEx in the share buyback of the company.
The company presented in the quarter, cash generation quite positive BRL 397 million. This generation reinforces the commitment of the company to balance its capital structure and allows us to maintain perenniality in the long term.
As Mauricio has informed already, additionally through the themes, we had the approval of the second amendment, the second group share buyback program, keeping the program active and allowing the company to continue its strategy of allocating capital and resources where it finds value. And also this approval of early distribution of dividends of BRL 72 million will allow us to maintain the strategy as well.
I'd like to now open up for the Q&A session. If it is not possible to answer all the questions of the webcast now, our IR team will continue later. Please, operator, you may proceed.
[Operator Instructions] Mauricio, we get a question via webcast from [ Lucas ].
Congratulations of the results. I'd like to understand if in the fourth quarter, do you have any maintenance shutdown? And if you have, if it is possible to maintain the current levels that are considered in the third quarter? [indiscernible]
Thank you, [ Lucas ], for your question. We don't have, for the fourth quarter, no major scheduled shutdown. We will have small shutdowns or repeat shutdowns for maintenance of our assets, which is something that happens continuously and is preventive maintenance as we usually do. The use of the plant for the quarter, well, we will see -- well, it will depend on the offer, or this market demand, actually, to see how they are going to be used. Okay?
So one more question, Mauricio. [ William and Marcel Nicolau ].
What is the price trend of PVC for this quarter and for the next? And then I have -- well, adding to this question, I have [ another ] question for [indiscernible]. What's the dollar price expectations for PVC and soda for the forthcoming quarters?
Thank you, [ William ] for the question. Well, PVC and soda prices, they are defined internationally. And our local pricing is based on global prices, and so prices will depend on supply and demand internationally and the market. Therefore, I cannot comment or give you a precise price. It will depend very much on the behavior of the international market.
The next question is from the [ Rahul Rochester ].
The policy of share buyback cannot impact the price of shares. Wouldn't it be better to pay dividends?
Thank you for the question. We understand that the share buyback policy is very well balanced and does not impair the liquidity of shares. We have 3 categories with different liquidity the PNB is the most liquid. But anyhow, we consider that. And in terms of dividends, we have the policy being 35% of the net income, and we should follow this policy.
So we have been balancing everything. So we have this early payment, a prepayment approved on the 11th and the share buyback program for us to allocate capital at the time of extreme liquidity that we have and visualizing which project we're going to invest on, okay?
[Operator Instructions] We have a question from [ Alberto Canzel ].
Congratulations on the results, represented scale capacity in terms of [indiscernible] and Bahía Blanca reached historical levels in this quarter. What are the main reasons for this is? Or does the company believe the level will be maintained next year?
Thank you, [ Alberto ], for the question. The main reason for the good performance of these plants, as I've mentioned previously, is that we've invested very much in the past year in programs for improvement of reliability and productivity of all our plants. These programs have various aspects. We look from maintenance to step up and also asset management and the way we operate; in addition to have engineers always studying our processes and seeking a way to make them more efficient so reducing losses and improvement in reaction. And this is a project that has been conducted for many months. And now we see the results now.
As to whether they will continue with this level of performance next year, we will keep on working on these programs. These programs have not been completed. There are continuous improvement processes in the plant. We also depend on having appropriate demand to ensure the continuity, and the better our plants run in terms of demand, fewer shutdowns and fluctuations, the more efficient their operations are.
Next question is from [ Mr. Sefer Yoshikamo ] from Citibank.
This is very interesting. I have 2 questions. First, going back to prices, international prices, I understand that this is given by the international market. But looking at the demand side, can you give some opening regarding orders for the quarter -- fourth quarter or 2021, if you have something for emergency funding or to -- we will have some drop in the PVC?
Second question is considering the better cash position and the consolidated, are you moving towards some kind of deleveraging, some acquisition? If you can sort of give us some kind of view on that?
Thank you for the question. Regarding market prices, and future and orders, that I may comment on now is that we have some industries, some segments are the basis of the consumption of our product. So undoubtedly, if the segments have a good performance and the economic performance there continues steady, this will be quite likely to have positive effects on our company.
The segments that are closer linked to our products, let me take by product. Overall, PVC, civil construction, is the great consumer. Then we have a bit of what is consumed by the OEM, fashion and health care [ borrowing ] basically for water treatment services and hygiene and cleaning and caustic soda. It's a bit broad of a main industry, the food industry. Also [ boats ], cleaning products and shampoo as well, mining industry amongst others. So those are the main consumers of our product. So again, if they have a good performance and the economy, not only local but also international, continue active, then will have a reflect on our performance, obviously. As to cash and our -- the vision of liquidity and leverage, we are continuously looking at opportunities for expansion and growth, be it in the increasing capacity, be it in new units and acquisitions within the chemical industry, but we also look at improving our competitiveness.
One of the ideas of our joint venture with the shared control of AES, which we invest in league with our renewable energy, we wanted to improve our cost situation and through energy overall and improve our sustainability. So we are continuously looking at projects that help us buy better or have assets to our input or actually, allowing us to reduce total cost of acquisition.
[Operator Instructions] There is one more question from [ Lucas ] here.
Can you add with this forecast of investment for the replacement of the 25 -- you maintained BRL 25 million? Can you expect any reduction in the cost of the energy, the power generation? Can you answer?
The investment currently is at -- we mentioned USD 140 million. This is what we've said. We continue with this position. We don't see a change in dollars although if there is a growth in dollars, it is possible to estimate a cost reduction of electricity. So the membrane conception uses less electricity, but there is some cost and increase as the team for purification and for evacuation of water.
So yes, it is possible to estimate. It is not an investment that will return in the short term, but it is an investment that we understand not only for the signatories of the agreement that will bring benefits to the company and have a longer payback. So it's a mandatory investment. It removes mercury from our sales, which is important to our strategy of -- in the long-term for our ESG goals and it brings benefits in the mid-long term.
Next question is from [ Daniela ].
Are you looking at the market, seeking acquisitions as a way of expanding the array of products offered by the company now, if you please?
[ Daniela ], thank you for the question. We -- as I said, we are evaluating various alternatives, both to increase our vision, our market position in the market with sort of flowing and PVC, but to actually increase our presence in the area of chemical industry and input. So we are analyzing possibility.
One more question received from [ Alan ].
Wind power produced by the joint venture with AES Tietê will be consumed by -- on your product?
[ Alan ], thank you for your question. All the energy produced in this partnership will be consumed by Unipar.
Next question from [ Rafael ].
What is the size of the exposure of the company in the Argentinian market?
Thank you for the question, [ Rafael ]. We have practically 1/3 of our production and revenue coming from Argentina. So you may consider that 1/3 of our result earnings are the exposure we have in the market in Argentina.
One more question from [ Tadiana ].
Does the company intend to verticalize it to the input energy industry in the [indiscernible] unit?
In the matter of energy, we will continue to seek projects for high production which is the case of this joint venture with AES, which is an input that is quite relevant for the company. When we talk about the electrolyzed process, that's why we decided to move on to ensure access to energy benefits of high production and also considering the sustainability, renewable energy.
For other inputs, we are continuously studying alternatives. It will depend on the alternatives coming up and appropriate conditions to actually make it worthwhile any kind of investment in any other kinds of input.
One more question from [ Otis Carmichael ].
Does the company expect to pay more earnings in December 2020?
Thank you, for your question. We don't have this report yet. Reminding you that we had a prepayment, approved payment of dividends and the allocation of resources for the shareholders to be able to diversify their investments, but we move on with our policy of 25% of dividend of the net income. And we have no expectation of payment on other date after the approval of the annual results.
[Operator Instructions] Next question is from [ Marcus ].
First, congratulations on the results. I'd like to know what is level that is financially sustained in the use of the Bahía Blanca plan considering it is still low comparatively to the other plants. Do you think that the chemical and PVC market has suffered more during the pandemic in Argentina?
Thank you for your question. First thing I'd like to clarify is that our indicator of capacity use is an average of the various plants that we have on the [ establishment ]. It's not only PVC or electrolysis, et cetera, et cetera. But the answer is yes. We are working continuously to try to improve reliability and the efficiency of the plant. And so certainly, we would seek alternatives to try to improve. But it is -- well, it is still low compared to the other plants. The market is different, and the plant has a different setup from the other plants. So not necessarily are they comparable in the way they have been designed. And this average that I've commented on is the ensemble of the various parts of the plants are directly compared to the Santo André and Cubatão plants.
With regards to the chemical and PVC market, they suffered more with the pandemic. Well, actually, as I mentioned, second quarter, PVC was the product that was most impacted by the pandemic and suffered a loss due, obviously, to the shutdown and the lockdown. Argentina had a lockdown period that was more intense and longer than in Brazil and this in some industries that in Brazil that resumed faster in Brazil. They were slower in Argentina and this may explain a bit the difference in terms of the use of capacity in certain segments.
The chemicals market is a bit more stable because soda is seen as an essential product. And so doing the both of them, especially the second quarter, that was more intense. And now the third quarter, it has been used in a continuous way throughout the period.
Next question comes from [ Nicolas ].
How does the company see the cash flow considering foreign exchange rate in the Bahía Blanca without being able to repatriate the products and the reinvestment made in the local currency?
[ Mike ], thank you for your question. Quite relevant. Currently, we have cash generation that is healthy in Argentina, which allows us to look into the plant. And as Mauricio has mentioned in the previous question, to make the necessary investments and seek excellence that is necessary, which is the main or primary factor to our operations we've seen in the tools that we have for protecting cash and devaluation.
We have robust cash there, and we are protected considering any kind of depreciation. This is not a problem. And in terms of repatriation of the cash, we don't have this demand or this guidance. We have certain restrictive clauses in the purchase agreement as the company in the past. And even though we see great value in the investments that we have to make in our plants and also in our chain. So, so far, we have not seen any kind of problem in money from there. We haven't challenged ourselves to take money from there, where we've been looking quite seriously and allocating cash so that we do not have any kind of exposure considering a foreign exchange depreciation.
The next question comes from [ Kyle Matthews ].
Do you have any sales growth strategy?
[ Kyle ], thank you for your question. Our product, so the PVC and chlorine are quite mature products. And this means the broad use and very well known. So a lot of the growth depends on organic growth. So there's the development of certain industries. However, on the other hand, we also are looking for alternatives. Without these alternatives, we continue to look at export alternatives to use our capacity a bit more, specifically as to PVC, and also the hydrochloric acid, we are looking for other applications in our end customers. And we continuously look at the market to find new customers and increase our penetration in the markets where we operate, especially in South America. So yes, we do have growth strategies of sales in all kinds of dimensions.
The next question is from [ Gustavo Burgess ].
Do you have any estimate as to how much we could reduce the power costs after the implementation of the project with AES Tietê?
Thank you, [ Gustavo ] for the question. Yes, we have an estimate. This is part of the business case for us to make the investment. This is a joint venture that will correspond to 30% of our consumption here in Brazil. So there is room to do more. But we also have a strong upside in producing energy that we consume. So we estimate quite strongly the gains, and it makes great sense for us to make such type of investment.
Obviously, I cannot share with you the amount. It is still confidential. But it made great sense for us to invest since we assure clean energy production, so power supply. So we have supply that is assured clean. And also, we have the benefit of being the consumer. So these 3 factors are very important to us, and we're quite happy with the project.
Excuse me, we now complete the Q&A session. I'd like to give the floor to Mr. Russomanno for the final remarks. Please, you may proceed.
Well, thank you very much for your participation in today's earnings results conference call. It's been quite positive for the company. It's been a combination of a return on the demand of the market and excellent operations that allowed us to capture this demand and act in the market.
And in the second quarter, we did not have it. And the third quarter, part of the demand from one quarter to the other, we have a more increased demand, and it also contributed to our results, the recovery of international prices and foreign exchange that is depreciated in Brazil.
However, we have to keep on working with great dedication and energy, seeking alternatives for growth for the improvement of our competitiveness since our competitors internationally in the U.S. and Asia are very competitive in terms of input. So it's very important for the company not to stop seeking these alternatives, inputs and process improvement. We have to keep on seeking operational excellence to keep on producing well in a lean way with good cost control. So only then will our company manage to continue sustainable and producing more [ results ].
I'd like to take the opportunity to thank the business partners throughout this period of the pandemic asking about customers, suppliers, authorities, associations, the surrounding communities because it has been quite a challenging time to manage all the chains.
And we've been able to work jointly, which is with this great integration with the various partners and all themes and challenges that we have been facing, not only by our company, but to everyone around us.
And finally, I'd like to conclude congratulating all the Unipar team for the commitment and great efforts throughout this period throughout the pandemic in the second quarter, continued in the third quarter and trying to maintain the company firm, operational, especially with their following all the protocols that were very strict in a safe and sustainable way. So thank you all very much. Take care of yourself, keep on safe and see you next quarter.
The Unipar conference call has ended. We thank you all for your participation, and we wish you a good afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]