Duratex Day 3Q20 Results Presentation - November.3rd
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Duratex
Day
Results Presentation
3Q20
November.3rd
2020
Disclaimer
The information here in has been prepared by Duratex S.A.
and does not represent any form of prospectus regarding
the purchase or subscription to the company’s shares or
securities.
This material contains general information relating to
Duratex and the markets in which the company operates.
No representation or guarantee, expressed or implied, is
made herein, and no reliance should be placed on the
accuracy, justification or completeness of the information
provided.
Duratex does not offer any assurances or guarantees
regarding the fulfilment of expectations described.
Duratex Day 2
Covid-19 WAY OF
BEING &
Temporary
shutdown of the DOING
manufacturing
‘Home office’ for facilities
administrative areas Factories operating at full
Start process capacity
resumed
Crisis committee
Donation of Strong return
R$ 10 milhões to of demand
Capture
of R$ 1,6 billions combat COVID-19
Strong contat
with customers 3Q
1Q 20
20 2Q
20
Social distancing Reduction in interest rates
Emergency 2% (Copom)
Fall in consumer government aid of
confidence R$600 New construction projects
resume
Scenario Partial shutdown Home improvement stores
of industry considered essential
Start of flexing of social
distancing rules
3
Net Revenue and Gross Margin
Highlights 3T20 R$ million / %
1,308 +36%
1,778
Best quarter in history 27.1%
32.5%
Duratex quick reaction to the recovery in the sector's demand
3Q19 3Q20
Greater operational efficiency driving increase in margins
Net Revenue Gross Margin
R$ million %
Continued focus on the cost reduction project Recurring EBITDA & Margin
R$ million / %
434
238 +82%
24.4%
18.2%
+40%
Adjusted & Recurring EBITDA 434 3Q19 3Q20
R$ million Recurring EBITDA EBITDA Margin
R$ million %
310
275 Recurring Net Income
226 237 227 238 R$ million
216 205 210 176
186
+477%
30
3Q10 3Q11 3Q12 3Q13 3Q14 3Q15 3Q16 3Q17 3Q18 3Q19 3T20
3Q19 3Q20
4
Cash Flow
Strong cash generation with improved
Cash Conversion Cycle
management of working capital Days 3Q19 3Q20
93 98
62 day reduction in the cash conversion cycle, reflecting 84
64 67 59
low inventory levels and receipt of renegotiated 53 36
payments in 2Q20
Client PMR Inventory PME Suppliers PMP Cash Cycle
Investment of R$311m in LD Cellulose, totaling YTD 2019 YTD 2020
R$522m in the year
103 112 105
71 85 69
68
42
Fluxo de Caixa Livre YTD
R$ million +88%
Client PMR Inventory PME Suppliers PMP Cash Cycle
772 3T19
631 679 CAPEX
3T20 R$ million
289
116 YTD YTD
10 19 81 35 103 Investments 3Q19 3Q20
2019 2020
(57) (32) FORESTRY OPEX 45 31 132 89
(140) (68)
(255) (108)
(301) MAINTANANCE 36 83 125 212
(576)
CAPEX
81 114 257 301
Sustaining
Recurring Working CAPEX Taxes Others Finance FLF Projects TOTAL EXPANSION
EBITDA Capital Sustaining Flow Sustaining FCF
30 311 78 534
PROJECTS
5
Debt
Lowest level of leverage in the last 5 years
Increase in liquidity driven by greater cash generation
Strong reduction in leverage arising from improvement in operating results
Liability management: early settlement of R$300 million in loans raised in 2Q20
Short
Amortization timeline 23% Financial leverage
R$ million R$ million
Average debt term: Average cost: Term Net debt
3.3 years 3.05% p.a.
Net debt/Recurring EBITDA (LTM)
77%
1,560 Long 2,49x 2,55x
2,17x
1,88x 1,79x
2,161 2,059 2,180
779 807 1,885
1,705
611 638
562
37 12
Cash Position 2020 2021 2022 2023 2024 2025 2026+ 3Q19 4Q19 1Q20 2Q20 3Q20
6
Wood
Solutions for better living
17
Sector Environment: IBA in 3Q20
Resumption of the panels market
Growth of the domestic market of 21.4% versus 3Q19
Both the industrial and the carpentry sectors showing significant growth: effect of pent-up demand from
2Q20 plus the change in market habits has strongly impacted the reduction in stocks of wood panels
Duratex readiness enabling increase in market share
Total panels MDP Domestic Market MDF Domestic Market
Volume 000m3 Volume 000m3 Volume 000m3
+20% 2,455 +24% 1,311
+18% 872 1,058
Domestic
2,047 Market:
+21,4% 741
External
Market:
+9,5%
3Q19 3Q20 3Q19 3Q20 3Q19 3Q20
8
Drivers of 3Q20 Results
Asset optimization, Commodities efficiency and Focus on differentiation
Ativos
Assets Commodities High-end products
Industrial Operation Product
Record production and billing history Cost competitiveness Focus on differentiation
Optimization of manufacturing Factory operating at full capacity Assertiveness of Duratex Collections
output Vocation of manufacturing units Adherence to indoor collection
Reduction in inventory levels and Planning accuracy Sales policy as a volume lever
focus on maintaining service levels Go Live TMS (Transport management)
(OTIF¹)
Coming Soon...
Sales 2021 collection – Revestir Launch
Coming Soon... Sales policy maturation
New finishings line, with no impact Sales execution (Sell-in vs Sell-out)
on manufacturing capacity
1 – On Time In Full: performance measure generally expressed as a percentage, which measures supply chain delivery: the product expected, in the quantity ordered, at the time and place agreed with the client. 9
Strategy in numbers
Strategy evolution in Duratex’s results
A Division Undergoing Transformation: Initiatives
SALES STRATEGY FOCUSED ON COST LEADERSHIP FOR ASSET OPTIMIZATION
DIFFERENTIATION COMMODITIES AND EVA IMPROVEMENT
Pricing Dedication of the manufacturing Divestment of forestry
units assets
Sales execution
Sales and Operations Planning
(S&OP) Positive EVA in the division
Portfolio
Lean Structure Significant improvement in
the financial cycle
Inventory and OTIF1
Strong cash generation
Result: Evolution of the Margin
7.9%
25.4%
20.4% 2.3%
5.2%
Margin 3Q19 Price / Mix Costs / Exchange Margin 3Q20
Productivity Rate
1 – On Time In Full: performance measure generally expressed as a percentage, which measures supply chain delivery: the product expected, in the quantity ordered, at 10
the time and place agreed with the client.3Q20 Results Recurring EBITDA & Margin
R$ million / %
252
Sales volumes boosting results and 1 +74%
145 25.4%
operational efficiency 20.4%
Significant gains in market share
3Q19 3Q20
Focus on cost reduction reflected in the operating Recurring EBITDA
R$ million
EBITDA Margin
%
margins
Net Revenue and Gross Margin
74% increase in the Recurring EBITDA R$ million / % 992
724 +37%
30.3%
22.7%
3Q19 3Q20
Net Revenue Gross Margin
3Q20 R$ million %
Capacity Wood Volume
Utilization 93% 000m3 890
%
643 +38%
MDP MDF
100% 85%
3Q19 3Q20
1 – disregarding the expenses with the new Dissolving Wood Pulp division 11Wood Strategy:
Equilibrium Volume, Price and Mix
We maintain our differentiation strategy understanding
the importance of the commodity products
Volume and Price Strategic levers
First Step | Full Capacity
Competitive efficiency
Integrated S&OP planning
Strong growth in Commodities
Shorter operational cycle and maintenance
Price assertiveness of service level
Reduction in inventory levels: finished goods, raw
Mix materials and MRO¹
Goal| Full Potential Product life cycle
Differentiation Pricing² – Competitive Intelligence
additional productivity gains Sales Execution
Increasing trend towards products of BATNA3: Vocation of manufacturing units and cost
higher added value efficiency
TMS (Transport Management System)
1 – MRO: Maintenance, Repair and Operations | 2 – Price strategy developed based on the evaluation of a set of information, with the
objective of bringing the value of products closer to consumer expectations | 3 - Best Alternative to a Negotiated Agreement: negotiation
strategy that aims at gaining for both sides involved. 12Deca
Solutions for better living
17Sector Environment
ABRAMAT Data
Return to consistent consumption in 3Q20
Performance of Deca significantly better than the sector
Construction materials industry Deflated Gross Revenue
billing vs 2019 YTD vs 2019
% %
4.2% 23.0%
3.8% ABRAMAT
DECA
2.6%
4.0%
-0.8%
-5.6%
Jul/20 Aug/20 Sep/20 3Q YTD
14Strategic Agenda
Snapshot October 2018 to October 2020
OPERATIONAL AND
INNOVATION SALES EXECUTION
LOGISTICAL EFFICIENCY
30% reduction in the portfolio New funnel reducing time to market to 4 months Start of Sales Policy redesign
Gains in manufacturing productivity Inox washbasin launch Structuring of the Trade Marketing area
IQG1 and min/hr equivalent
Rapid delivery launches at Revestir Integration and capture of Deca + Hydra
Factory consolidation Touchless line synergies
Transfer of assets without loss of capacity Ricardo Dias Design line
(Tubarão Aracaju / São Leopoldo) Launch of new Sales Policy
Textured Line
Headcount reduction Hydramotion line Implementation of quarterly JBP2
Colored wash-basins
Maximization of Tax Incentive Restructuring of the Sales Area
Hydra Puravita
78% in the last 2 years
Start of ZBB for management of working capital “Brutalista” washbasins Asset Light
Introduction of new metrics in the sales routine
Service level evolution Price compliance
Ongoing search for productivity Floor Share
+25% vs LY Coverage
Paraíba fittings operating at 93% IQG Launch of Marketplace Deca
World-class standard Sales force priming in the CE
Hydra – Restructuring of the product platform Creation of the RGM3 area
Product returns index -50%
Restructuring of the factory layout
44% of the leadership
OCT18 TO OCT19
OCT19 TO OCT20
1 – Overall Quality Score - Percentage of parts produced that conform to Deca quality standard| 2 - Business plan that provides for joint commitments between all those responsible for the operation| 3 – Revenue Growth 15
Management: Data analysis application that allows more assertive decision making, increasing product availability and price to maximize revenue.Adjusted & Recurring EBITDA
3Q20 Results and Margin
R$ million / %
114
Strategy translated into numbers 69 +65%
22.2%
16.9%
Significant gain in volume
3Q19 3Q20
Operational efficiency reflected in cost reduction Recurring EBITDA
R$ million
Margin
%
Productivity compensating for exchange rate impact
Net Revenue and Gross Margin
R$ million / % 511
Consecutive records for billing and sales
406
+26%
35.0%
Capacity Utilization 3Q20 30.8%
%
3Q19 3Q20
Receita Líquida Margem Bruta
Deca R$ milhões %
90% Volume
‘000 items 8,187
6,536 +25%
Sanitary
Showers Metals
ware
89% 93% 90%
3Q19 3Q20
16Looking ahead...
SOLUTIONS FOR BETTER LIVING
INDRUSTRIAL & MARKET EXCELLENCE IN
NEW REVENUE
LOGISTICS INNOVATION INTELLIGENCE IN SALES PEOPLE
SOURCES
EFFICIENCY ACTION EXECUTION
TECHNOLOGY
CULTURE – WAY OF BEING & DOING
22.2%
6.0% 6.0% 5.3%
1.0% 16.9%
1.3%
14.6%
We have confirmed our
Strategic Agenda
EBITDA Margin evolution
Margin 2018 Price Productivity 3Q19 Margin Price Mix Productivity 3Q20 Margin 17Ceramic Tiles
Solutions for better living
17Sector Environment – ANFACER Data
Ceramic Tiles sector with strong recovery after market
reopening Sales volume of the ceramic tiles
industry vs 2019
%
jan-00
13.1%
Growth of 10.2% in volume sold in jan-00
9.7% 10.2%
relation to 3Q19, with the improvement 7.8%
jan-00
jan-00
in July/20 a highlight jan-00
jan-00
Significant increase in the use of
jan-00
jan-00
installed capacity in 3Q20 (80%) Jul/20 Aug/20 Sep/20 3Q20
compared to 2Q20 (39%)
Capacity Utilization
%
3Q19 3Q20
76% 80%
19Strategy in numbers
Strategy evolution in Duratex’s results
BEST CERAMIC TILES COMPANY IN BRAZIL
MANUFACTURING SALES & ADMINISTRATION
BRAND SYNERGY
SYNERGY SYNERGY
Focus on high-end products
Start-up of Ceusa expansion – Merger of Comercials, Administrative
Industria 4.0. and trade marketing team Discontinuation of the Cecrisa
brand
Transfer of manufacturing unit Unification of the external sales team of
from MG to SC. salespeople and promoters Replication of Ceusa`s technical
differentials at Portinari
Optimization of processes and Unification of Ceusa and Portinari trade
factories (greatest lb/min). policies Strengthening Ceusa social
media leveraged by the Portinari
Distribuition Centers reduction Union of the management of the export brand that is the leader of its
from 5 to 2 channel with Deca, which strengthened segment on the planet.
the result for both businesses.
Launch of Smart store
Expansion Project ramp-up
RESULTS: Evolution of EBITDA Margin
3.9% 24.8%
3.0%
17.9%
Margin 3Q19 Price Productivity / Margin 3Q20
Synergy
20Adjusted & Recurring EBITDA
3Q20 Results and Margin
R$ million / %
68
+114%
24.8%
Prioritizing capture of synergies 32
17.9%
Improvement of mix allied to better market 3Q19 3Q20
positioning of brands Recurring EBITDA
R$ million
EBITDA Margin
%
Gains from synergies reflected in the operating
margins Net Revenue and Gross Margin
R$ million / %
275
Focus on the capture of the manufacturing
178 +55%
synergies
35.7% 35.8%
3Q19 3Q20
Net Revenue Gross Margin
R$ million %
Capacity Utilization Volume
% ‘000m² 7,246
4,939 +47%
3Q19 3Q20
97% 93%
3Q19 3Q20
21
Consolidation of Cecrisa's results since August / 19Ceramic Tiles
Strategy update
OPERATIONAL
SALES EXCELLENCE
EXCELLENCE
Restructuring of market intelligence Strengthening of modernization
Entry into e-commerce and Industria 4.0 for other units
Focus on high industrial
Strengthening of sales policy
performance
LET’S BUILD
Synergy between businesses
Evolution of the service level –
S&OP
THE BEST
IN BRAZIL.
Go Live SAP S4/HANA
STRENGTHENING
BRANDS
Growth of relationship programs
with specifiers, sellers and settlers
Focus on the Consumer Journey
Consolidation of the smart store
22Dissolving Wood
Pulp
23Dissolving Wood Pulp
Update
Forestry contribution equivalent to approximately R$ 500 million
Cash investment of R$ 522 million this year
Issue of USD 1,2 billion from the institutions IFC, IDB e Finnvera
Financing structure has won awards: “Loan of the year” e
“Infrastructure financing of the year: Brazil of Latin Finance Awards
24Dissolving Wood Pulp
On budget, on time
Investment of R$311 million in the quarter
1st disbursement of IFC/IDB funds in September 2020 – US$92 million
2018 2020 2022
2Q18 2Q20
Signing of Structuring of financing 1S22
agreement Start of construction Start of operation
2Q19 1Q23
Installation license Construction Operation at full
4Q19 capacity
Creation of
joint venture
2019 2021 2023
25Solutions for better living
Trends and Innovation
26Trends and Innovation
The level of maturity of our sector Home improvement is the
sector that is the second least
Matrix of the Disruptibility Index of the Manufacturing Sector - 2018 innovative among the
Scale 0-1 (1 = most susceptible / disruptive) 20 sectors of global industry
(Source: Gartner)
0.80
VIABILITY Average 2018: 0.54 VOLATILITY
18% OF COMPANIES 33% OF COMPANIES It also has the second least
level of digitalization among the
Current level of disruptibility
0.70
Media Retail Transport
16 industries evaluated
0.60
Consumer (Source: Accenture)
goods
Software Real Estate Insurance
Banking
0.50
Average 2018: 0.51
Life Science Travel
Automotive Home improvement is the only
Equipment
Energy Amazon category that is
0.40
Utilities Capital Markets
Health
Chemical
Mining growing by double digits per
0.30
year (Source: Accenture)
Construction
DURABILITY VULNERABILITY
11% OF COMPANIES 38% OF COMPANIES
0.20
0.20 0.30 0.40 0.50 0.60 0.70 0.80 Meanwhile, in Brazil, the
Susceptible to disruption in the future penetration of e-commerce is
1.4% for construction materials
and 3.4% for decorative items
(Source: Accenture)
Major opportunity to lead the digital
transformation process in the industry
27Trends that will make an impact
20 trends that will impact the future of Construction, Refurbishment and Decoration
Acceleration of Dissemination
Increase in prices Lower income
New demand and costs bracket housing
urban of Community
verticalization living
Modernization Modular and Globalization
Expansion of SSMA Pre-fabricated
of the Value semi-modular
legislation components
of the production
Chain construction chain
Artificial Small format
4.0 Industry BIM1
Intelligence stores
Digital
technology
Content Automation and
Marketplaces and Digital
Management digitalization of design
e-commerce engagement
System and manufacture
Innovation in Use of alternate
Use of cheaper Creation of more durable Energy efficiency and
Materials and materials and efficient materials water conservation
and recycled
Methods materials
Source : LEK Consulting, sector trends. November 2019
1 – Building Information Model: Concept of virtualization, modeling and management of activities inherent to the design / construction of engineering works
28The importance of understanding the journey
The journey from the perspective of Channels, Producers and Influencers
Acquisition Refurbishment
Product Repair
or Construction and decoration
and Maintenance
of a property of a property
ANNUAL MARKET R$107bn R$118bn R$7bn
R$233bn 46% 51% 3%
INFLUENCERS ON Construction
company
Broker Architect Decorators Carpenters Architect Plumbers Installers Builders
THE JOURNEY
Social Networks Friends Internet Social Networks Friends Internet Electricians Friends Internet
Construction Digital Specialist Technical
Realtors Carpenters Insurers
CHANNELS ON THE Companies Channels Stores Assistance
JOURNEY Land sub- Furniture Furniture
Developers Retail Home Centers Wholesale
developers Stores Industry
KITCHEN / BATHROOM FIXTURES &
WOOD PANELS FLOORS AND CERAMIC TILES
FITTINGS AND ELETRIC SHOWERS
29The importance of understanding the journey
The journey from the perspective of the Consumer
Acquisition Refurbishment
Product Repair
or Construction and decoration
and Maintenance
of a property of a property
ANNUAL MARKET R$107bn R$118bn R$7bn
R$233bn 46% 51% 3%
Mood of the consumer is
volatile on this journey
Planning time ahead of Months - Years Weeks - Months Minutes - days
decision-making
Willingness to Pay Low Medium High
Level of representation of
Irrelevant Very relevant Driver of decision
our products
Tolerance to lead time
Months Weeks Hours
variation
Average ticket is very
R$220k R$37k R$1.1k
different in each phase
30Building our Technology Roadmap
Consumer Journey Ownership through Digital (COD)
Acquisition Refurbishment
Product Repair
or Construction and decoration
and Maintenance
of a property of a property
OPERATING FRONT TECHNOLOGIES ROLE OF VIVADECORA
SuperApp Source of data
Sales Experience B2B N/A
ChatBot Whatsapp N/A
Market Place Tagging & Steering of leads
Digital Retail E-Commerce Canal B2PRO
Loyalty Club VivaDecora PRO
Self-Service Portal Platform for connecting
Service and Solutions
Platform for Professionals professionals and consumers
Data Architecture SEO Governance
Data & Analytics
Artificial Intelligence Data enrichment
31Update ESG
32Update ESG
Commitment to transparency and accountability based on
the purpose of Solutions for Better Living.
HOW WE IMPACT THE
HOW WE CREATE VALUE WORLD?
Diversity
WELL BEING Experience and Development of employees
Responsible Supply Chain
IMPACT Proximity to the community
Employee safety and health
CARE Engagement of influencers
VALUE CREATION INDICATORS 69% of waste discarded in Brazilian
operations is reused
Value creation Environmental Value creation for the
For Investors Value creation society
58% of energy generated from
44% Positivity balance of Taxes payed
renewable fuels
Of Total Shareholder 205 R$ 542.6
Return (TSR) Thousends tCO2e million
63% of water reuse in Brazilian
Remuneration and operations
employee benefits
R$ 709.6 million
1 – Data base december/2019 33THE NEW DURATEX Strategic Pillars
A company focused on...
People
People are our strength
...cash generation, while maximizing shareholder value
Remuneration of executives based on cash generation and EVA
Results
...sustainable growth Sustainable high performance
Organic and inorganic growth within our
Way of Being and Doing
Processes
...innovation and digitalization We work well, simply and safely
As a way to simplify our processes and leverage our sales channels
...strategic assets
Client
We are the best choice
Optimization of current assets and productive management with
strategic partners
...client solutions
One-stop shop, complete experiences and environments Nice to meet you. We are
34INVESTOR
RELATIONS
Henrique Haddad - VP of Adm, Finance and IR
Natasha Utescher – IR Manager
Alana Santos – IR Analyst
Duratex Mariana Sourcenelle - IR Analyst
Day duratex.com.br/ri
investidores@duratex.com.br
Results Presentation 11 3179.7530
3Q20 Av. Paulista 1.938 - CEP 01310-200
Consolação- São Paulo – SP
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