Holding company says heavy investment phase is over and focus is on increasing shareholder returns
With the R$ 7 billion invested by 2023, Simpar has ended the cycle of major investments aimed at structuring its business and must now seek greater returns for shareholders. The goal in this new phase is to capture the efficiency gains of its eight subsidiaries, taking advantage of the structure that has been built up mainly over the last five years. The expectation is that the change will result in the payment of higher dividends in the medium and long term and improve the valuation of its shares on the stock exchange.
As the parent company of three companies listed on B3 - JSL, Movida and Vamos - and five more privately-held companies (Automob, CSBrasil, CSInfra, Ciclus Ambiental and BBC), the group has invested close to R$ 30 billion over the last three years, mainly to structure the businesses of the listed companies and Automob. Around 98% of these funds were used to buy cars, trucks and equipment. In addition to the 26 acquisitions made since the second half of 2020 by JSL, Movida, Vamos and Automob.
This growth strategy led the company to a leverage ratio at the end of December of 3.7 times net debt to EBITDA (earnings before interest, taxes, depreciation and amortization). This ratio was 3.5 times at the end of 2022, the year in which the group invested a record R$ 13 billion.
Fernando Simões, president of the holding company, says that the group's faster structuring process, which began in 2020 with the creation of Simpar, is over. Investments in assets are likely to be lower and the search for acquisitions is also likely to be lower, but this doesn't mean that Simpar will stop looking for opportunities, especially in the transportation (JSL) and car dealership (Automob) segments.
"The last few years have been about building the base. Now we're going to try to get more out of all the businesses. Part of the investment made last year, for example, will only generate value in 2024," said Simões. "I believe that capex [investment] will be lower from now on, but that doesn't mean that the group won't continue to grow."
Simpar closed 2023 with net revenue of R$ 35.5 billion, up 34% on the previous year. Ebitda rose 20% year-on-year, to R$ 8.2 billion, and net revenue from services reached R$ 25.6 billion, up 36%. But the group reversed its 2022 net profit of R$ 836 million into a loss of R$ 280 million at the end of last year.
Following the publication of the balance sheet for the fourth quarter and the close of 2023 last week, bank analysts pointed out that the figures came in as expected, but with still weak performance from Movida's used vehicles and higher levels of depreciation, as well as weak sales of Vamos at dealerships amid the slowdown in the truck and equipment market. The positive points were the performances of Automob and JSL.
"Looking ahead, Vamos and Movida have already indicated improved operating performances in the first quarter of 2024, which should benefit Simpar in the short term. In addition, the consolidation of the group's unlisted waste management activities under the newly created Ciclus Ambiental could also pave the way for generating value in this part of the business," wrote Jefferies analyst Pedro Baptista.
Link to the article: https://valor.globo.com/empresas/noticia/2024/04/03/simpar-muda-e-vai-buscar-geracao-de-valor.ghtml