STANDARD FINANCIAL
STATEMENTS
2023
LUPATECH S.A.
CNPJ/MF nº 89.463.822/0001-12
NIRE 35.3.0045756-1
Publicly-Held Company with Authorized Capital -
New Market
Management Report
THIS IS A FREE TRANSLATION OF THE ORIGINAL TEXT IN PORTUGUESE IN CASE OF DIVERGENCE OF INTERPRETATION, THE PORTUGUESE TEXT WILL PREVAIL
Message from the Administration
2023 was a year marked by important financial events for the company.
On March 14, the end of the judicial reorganization was decreed. The filing for reorganization was made on May 25, 2015, so the effort to restructure the company's liabilities and operations lasted almost 8 years. The end of the process had positive repercussions both in the financial environment - more receptivity to the company's financing by the market - and in the commercial environment - with better customer perception of the company.
We resumed our activities in the capital markets, with two operations carried out during the period: an issue of convertible debentures with a subscription warrant as an additional benefit, and an issue of subscription warrants.
The 4th issue of debentures, in March, allowed for the injection of R$ 10 million in capital, and paved the way for a possible conversion of credits subject to judicial reorganization into capital, through the exercise of the warrants. Due to the fall in share prices, the parameters of the issue have not yet favored the materialization of debt capitalization.
Through the 4th issue of warrants, in July, the company achieved a capital injection of R$ 15.1 million up to the date of this report, less than the estimated amount, also due to the fall in share prices.
A third event contributed significantly to the improvement in the company's financial position: the settlement reached in the arbitration proceedings filed over contractual breaches associated with the acquisition of the San Antonio companies in 2012. As a result of the dispute, the company received compensation in the amount of R$ 47 million, of which R$ 32.8 in cash and R$ 14.2 in credit rights.
Finally, the company also made progress in the demobilization of assets remaining from service operations, having negotiated R$ 11.7 million in miscellaneous equipment, in cash and in installments, leaving an estimated R$ 20.6 million still for sale.
The order book ended the year with a balance of R$ 81 million in firm orders, an increase on the previous quarter, due to heated commercial activity.
In this vein, in the last quarter the company obtained two purchase orders for mooring ropes, allowing it to resume supplying this product. The Ropes and Composites business grew by 43% compared to the previous year, closing the year with revenues of R$ 8 million, mainly from the sale of fiberglass tubes (liners). The year 2024 is off to a more promising start, with a firm portfolio of R$ 12.1 million in this business.
In terms of valves, 2023 revenues were 25% lower than the previous year. The difference was due to a contract to supply valves for FPSOs in 2022, which generated revenues of R$ 19 million in the previous year. Despite the favorable portfolio throughout 2023, some events such as logistical delays and the retraction of credit supply at the beginning of the year (due to the contagion of a major event) hindered growth efforts. In 2024, we started the year with a better outlook in terms of liquidity and an accelerating order book.
Gross margin for the year remained at a similar level to the previous year, although gross profit fell in line with lower revenue. Product Adjusted EBITDA remained in positive territory, at R$ 2.7 million, with a margin of 3.1%. Total Adjusted EBITDA, including the Services legacy, remained negative.
With the end of the Judicial Recovery, various measures have been taken to reduce the cost of this legacy, especially in legal and administrative costs, and these measures should have an effect in the short and medium term.
The company made a net profit of R$ 52.6 million in 2023. This result was positively impacted by the gains resulting from the settlement in the San Antonio case, which, accompanied by financial inflows, contributed to the year ending with a more favorable cash position.
Rafael Gorenstein
CEO and Investor Relations Officer
Economic and Financial Performance
Lupatech mainly manufactures (Products segment) industrial valves; valves for oil and gas; ropes for deepwater mooring of oil platforms, naval use and cargo lifting; artifacts of composite materials, mainly electricity poles and tubes for lining oil pipelines.
The Company used to operate in the oilfield services business (Services segment), of which remain various assets in the process of liquidation and several legacy matters associated with it.
Net Revenue
Net Revenue (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Products | 21,324 | 19,626 | 25,136 | 19,960 | 86,046 | 109,629 | ||
Valves | 20,623 | 17,615 | 23,265 | 16,577 | 78,080 | 104,067 | ||
Ropes and Composites | 701 | 2,011 | 1,871 | 3,383 | 7,966 | 5,562 | ||
Services | 68 | 46 | 57 | 52 | 223 | 761 | ||
Oilfield Services | 68 | 46 | 57 | 52 | 223 | 761 | ||
Total | 21,392 | 19,672 | 25,193 | 20,012 | 86,269 | 110,390 |
Consolidated Net Revenue reached R$ 86.3 million in the course of 2023.
Products
The reduction observed between 2023 and 2022 is substantially due to the valve business due to the greater supply destined for the construction of an FPSO in the previous period. The decrease observed in 4Q23 compared to 3Q23 is largely due to the effect of projects delivered in 3Q23.
Services
Transactions carried out in this segment result from the liquidation of inventory balances and other activities related to plants that were demobilized, i.e., they do not arise from ongoing operations.
Order Backlog
As of December 31, 2023, the Company's order backlog in Brazil totaled R$ 81.5 million. On the same date, the Company had a balance of R$ 128 million in supply contracts, with no purchase obligation. (Note: the figures do not include bids for which the respective orders or contracts have not yet been issued).
Gross Profit and Gross Margin
Gross Profit (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Products | 5,205 | 4,175 | 6,288 | 4,615 | 20,283 | 25,219 | ||
Gross Margin - Products | 24.4% | 21.3% | 25.0% | 23.1% | 23.6% | 23.0% | ||
Services | 15 | 7 | (117) | (11) | (106) | 28 | ||
Gross Margin - Services | n/a | n/a | n/a | n/a | n/a | n/a | ||
Total | 5,220 | 4,182 | 6,171 | 4,604 | 20,177 | 25,247 | ||
Gross Margin - Total | 24.4% | 21.3% | 24.5% | 23.0% | 23.4% | 22.9% | ||
Depreciation | 1,301 | 1,212 | 946 | 919 | 4,378 | 5,463 | ||
Depreciation Products | 884 | 858 | 825 | 803 | 3,370 | 4,012 | ||
Depreciation Services | 417 | 354 | 121 | 116 | 1,008 | 1,451 | ||
Gross Profit without depreciation | 6,521 | 5,394 | 7,117 | 5,523 | 24,555 | 30,710 | ||
Gross Profit without depreciation Products | 6,089 | 5,033 | 7,113 | 5,418 | 23,653 | 29,231 | ||
*n/a - not applied |
Products
Consolidated gross profit for 2023 reached R$ 20.3 million, with a margin of 23.6% against R$ 25.2 million with a margin of 23.0% in 2022. In the quarterly comparison, 4Q23 versus 3Q23, there was a decrease of 1.9 percentage points, mainly due to lower revenues, with lower dilution of fixed costs.
Services
The results of the services segment do not come from production activities, only from the sale of remaining inventories.
Expenses
Expenses (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Total Sales Expenses | 2,470 | 2,368 | 3,509 | 4,331 | 12,678 | 10,232 | ||
Sales Expenses - Products | 2,470 | 2,368 | 3,509 | 4,331 | 12,678 | 10,232 | ||
Sales Expenses - Services | - | - | - | - | - | - | ||
Total Administrative Expenses | 5,554 | 6,223 | 4,739 | 4,711 | 21,227 | 22,765 | ||
Administrative Expenses - Products | 3,071 | 3,067 | 2,548 | 2,589 | 11,275 | 12,077 | ||
Administrative Expenses - Services | 2,483 | 3,156 | 2,191 | 2,122 | 9,952 | 10,688 | ||
Management Fees | 898 | 828 | 767 | 2,070 | 4,563 | 4,751 | ||
Total Expenses | 8,922 | 9,419 | 9,015 | 11,112 | 38,468 | 37,748 |
Sales Expenses
The Company's Sales Expenses are predominantly variable in the form of freight and sales commissions. In 2023, the Company's commercial expenses totaled R$ 12.7 million compared to R$ 10.2 million in 2022. The change was mainly due to the second half of 2023 due to the characteristics of the predominant businesses in that period.
Administrative Expense
Administrative expenses totaled R$ 21.2 million in 2023 against R$ 22.8 million in 2022. The reduction compared to the previous year is substantially due to the non-recurring expenses included in the result of the previous period compared.
Management Compensation
The amount presented is composed of fixed and variable remuneration.
Other Revenues and Operational (Expenses)
Other Operating (Expenses) (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Products | (75) | (483) | (100) | (4,321) | (4,979) | (6,281) | ||
Expenses with Idleness - Products | (5,547) | (4,489) | (5,105) | (3,589) | (18,730) | (18,560) | ||
Services | 3,899 | (180) | (1,298) | 9,225 | 11,646 | (21,816) | ||
Expenses with Idleness - Services | - | - | - | - | - | (30) | ||
Total | (1,723) | (5,152) | (6,503) | 1,315 | (12,063) | (46,687) |
In 4Q23, R$ 42.5 million were booked in "Other Operating Income" against R$ 41.2 million in "Other Operating Expenses", totaling a net effect of R$ 1.3 million. The following factors are worth of noting:
- R$ 27.6 million in revenue, referring to the favorable final sentence obtained by the Company in an arbitration proceeding seeking reimbursement for incurred losses subject to compensation in
accordance with the Investment Agreement signed for the acquisition of the San Antonio Companies by the Lupatech Group in 2012 ("Agreement of Investment");
- R$ 3.1 million corresponds to the net negative effect due to updates of contingent processes according to the analysis of legal advisors;
- R$ 3.6 million expenses with production idleness;
IV. | R$ 4.7 million with obsolescence and extraordinary inventory losses; |
- R$ 13.1 of recognition of impairment on other assets;
VI. | R$ 1.8 million negative net effect on the sale of fixed assets. | |||||||
Financial Result | ||||||||
Financial Results (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Financial Revenue* | 2,393 | 770 | 1,917 | 16,174 | 21,254 | 19,523 | ||
Financial Expense* | (12,225) | (14,125) | (7,924) | (22,846) | (57,120) | (45,659) | ||
Net Financial Results* | (9,832) | (13,355) | (6,007) | (6,672) | (35,866) | (26,136) | ||
Net Exchange Variance | 5,103 | 10,277 | (7,416) | 111,517 | 119,481 | 15,839 | ||
Net Financial Results - Total | (4,729) | (3,078) | (13,423) | 104,845 | 83,615 | (10,297) | ||
* Excluding Exchange Variance |
In 2023, the Company's net financial result was negative by R$ 35.9 million and its main effect was the adjustment to present value relating to the debt in Judicial Recovery, the updating of interest and fines on taxes, suppliers and loans. The total net financial result is influenced by exchange rate variation.
It is important to remember that exchange rate variations are predominantly the result of their incidence on balances between companies of the group abroad. The exchange rate oscillation affects in the opposite direction the translation into Brazilian Reais (BRL) of the equity of those entities, so that there are exchange rate variations booked directly to the company's equity, without going through profit and loss accounts.
Adjusted EBITDA from Operations
EBITDA Adjusted (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Products | 649 | (95) | 1,861 | 277 | 2,692 | 5,931 | ||
Margin | 3.0% | -0.5% | 7.4% | 1.4% | 3.1% | 5.4% | ||
Services | (1,945) | (2,525) | (2,439) | (2,116) | (9,025) | (9,281) | ||
Margin | n/a | n/a | n/a | n/a | n/a | n/a | ||
Total | (1,296) | (2,620) | (578) | (1,839) | (6,333) | (3,350) | ||
Margin | -6.1% | -13.3% | -2.3% | -9.2% | -7.3% | -3.0% |
The variation in Adjusted EBITDA of Products in 4Q23 compared to the compared periods is mainly due to the decrease in revenue.
Adjusted EBITDA from Services comprises legacy management costs.
Adjusted Ebitda Reconciliation (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Gross Profit | 5,220 | 4,182 | 6,171 | 4,604 | 20,177 | 25,247 | ||
SG&A | (8,024) | (8,591) | (8,248) | (9,042) | (33,905) | (32,997) | ||
Management Compensation | (898) | (828) | (767) | (2,070) | (4,563) | (4,751) | ||
Depreciation and Amortization | 1,301 | 1,212 | 946 | 919 | 4,378 | 5,463 | ||
Other Operating Expenses | (1,723) | (5,152) | (6,503) | 1,315 | (12,063) | (46,687) | ||
Ebitda | (4,124) | (9,177) | (8,401) | (4,274) | (25,976) | (53,725) | ||
Result of disposal or write-off of assets | (93) | (33) | 1,295 | 10,706 | 11,875 | 17,326 | ||
Provisions for Legal Proceedings | (5,195) | (387) | (101) | 3,082 | (2,601) | 122 | ||
Idle expenses | 5,547 | 4,489 | 5,105 | 3,589 | 18,730 | 17,938 | ||
Restructuring Process and Other Extraordinary | 2,569 | 2,488 | 1,524 | (14,942) | (8,361) | 14,989 | ||
Adjusted EBITDA | (1,296) | (2,620) | (578) | (1,839) | (6,333) | (3,350) |
4Q23 | |||
Reconciliation of Adjusted Ebitda (R$ thd) | Products | Services | Total |
Gross Profit | 4,615 | (11) | 4,604 |
SG&A | (6,920) | (2,122) | (9,042) |
Management Compensation | (1,449) | (621) | (2,070) |
Depreciation and Amortization | 803 | 116 | 919 |
Other Operating Expenses | (7,910) | 9,225 | 1,315 |
Ebitda | (10,861) | 6,587 | (4,274) |
Result of disposal or write-off of assets | 5 | 10,701 | 10,706 |
Provisions for Legal Proceedings | 107 | 2,975 | 3,082 |
Idle expenses | 3,589 | - | 3,589 |
Restructuring Process and Other Extraordinary | 7,437 | (22,379) | (14,942) |
Adjusted EBITDA | 277 | (2,116) | (1,839) |
Non-recurring expenses in 4Q23 mainly refer to production idleness, reversal of estimated losses due to non- recoverability of assets (impairment), result in the sale or write-off of assets and expenses related to Company's restructuring.
Net Result
Net Result (R$ thd) | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 2023 | 2022 | ||
Result Before Income Tax and Social Contribution | (10,154) | (13,467) | (22,770) | 99,652 | 53,261 | (69,485) | ||
Income Tax and Social Contribution - Current | (1) | - | - | 1 | - | - | ||
Income Tax and Social Contribution - Deferred | 75 | (1,044) | 1,533 | (1,176) | (612) | 124,351 | ||
Net Profit for the Period | (10,080) | (14,511) | (21,237) | 98,477 | 52,649 | 54,866 | ||
Profit (Loss) per 1,000 Shares | (0.32) | (1.43) | (0.09) | 1.82 | 1.28 | 1.81 |
The positive net result obtained in the period of 2023 is mainly influenced, in addition to current revenues and expenses, the adjustment to present value referring to the debt under Judicial Reorganization, exchange rate variation of related parties and the net effect of other operating income and expenses.
Working Capital
Working Capital (R$ thd) | 2023 | 2022 |
Accounts Receivable | 18,140 | 27,128 |
Inventories | 32,678 | 39,247 |
Advances of suppliers | 7,522 | 6,703 |
Recoverable taxes | 40,701 | 51,160 |
Other Accounts Receivable | 5,612 | 4,549 |
Total Asset | 104,653 | 128,787 |
Suppliers | 15,072 | 15,805 |
Advances from Customers | 1,161 | 8,037 |
Taxes payable | 22,323 | 25,977 |
Other Accounts Payable/Other Obligations | 5,783 | 5,698 |
Payroll and charges | 5,493 | 5,603 |
Total Liabilities | 49,832 | 61,120 |
Working Capital Employed | 54,821 | 67,667 |
Working Capital Variation | (12,846) | (53,675) |
When comparing 2023 with 2022, there is a reduction in working capital employed. This reduction is mainly due to: (i) reduction in inventories, and (ii) reduction in taxes recoverable resulting from offsetting tax debt.
Cash and Financial Investments
Cash and cash equivalents (R$ thd) | 2023 | 2022 |
Cash and Cash Equivalents | 19,907 | 13,171 |
Total | 19,907 | 13,171 |
The Company's consolidated cash position and financial investments in 2023 reached R$ 19.9 million.
Indebtedness
Debts (R$ thd) | 2023 | 2022 |
Short Term | 50,633 | 54,308 |
Credits subject to Judicial Recovery | 6,266 | 4,331 |
Credits not subject to Judicial Recovery | 44,367 | 49,977 |
Long Term | 95,027 | 101,346 |
Credits subject to Judicial Recovery | 92,262 | 95,526 |
Credits not subject to Judicial Recovery | 2,765 | 5,820 |
Total Debts | 145,660 | 155,654 |
Cash and Cash Equivalents | 19,907 | 13,171 |
Net Debt | 125,753 | 142,483 |
The reduction in financial debt in 2023 versus 2022 is mainly associated with debt payments.
Investment
Investments (R$ thd) | 2023 | 2022 |
Others Investments | 19,685 | 21,942 |
Fixed Assets | 131,405 | 138,386 |
Intangible Assets | 83,210 | 83,749 |
Total | 234,300 | 244,077 |
The variation presented in investment balances refers mainly to the application of impairment, sale of fixed assets, recognition of depreciation, amortization, and the effect of balance sheet conversion on the fixed assets of subsidiaries abroad.
Annexes
Annex I - Income Statements (R$ Thousand)
2023 | 2022 | |||
Net Revenue from Sales | 86,269 | 110,390 | ||
Cost of Goods and Services Sold | (66,092) | (85,143) | ||
Gross Profit | 20,177 | 25,247 | ||
Operating Income/Expenses | (50,531) | (84,435) | ||
Selling | (12,678) | (10,232) | ||
General and Administrative | (21,227) | (22,765) | ||
Management Fees | (4,563) | (4,751) | ||
Other Operation Income (Expenses) | (12,063) | (46,687) | ||
Net Financial Result | 83,615 | (10,297) | ||
Financial Income | 21,254 | 13,161 | ||
Financial Expenses | (57,120) | (39,297) | ||
Net Exchange Variance | 119,481 | 15,839 | ||
Loss Before Income Tax and Social Contribution | 53,261 | (69,485) | ||
Provision Income Tax and Social Contribution - Deferred | (612) | 124,351 | ||
Profit for the period | 52,649 | 54,866 |
Annex II - Reconciliation of EBITDA Adjusted (R$ Thousand)
2023 | 2022 | |||
Adjusted EBITDA from Operations | (6,333) | (3,350) | ||
Expenses with Restructuring and Other Extraordinary | 8,361 | (10,940) | ||
Provisions for Losses, Impairment and Net Result on Disposal of Assets | (9,274) | (17,448) | ||
EBITDA from Operations | (7,246) | (31,738) | ||
Depreciation and amortization | (4,378) | (9,512) | ||
Net Financial Result | 83,615 | (10,297) | ||
Income Tax and Social Contribution - Current and Deferred | (612) | 124,351 | ||
Idleness Expenses | (18,730) | (17,938) | ||
Net Profit | 52,649 | 54,866 |
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Lupatech SA published this content on 15 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 April 2024 15:07:08 UTC.