2Q22 Results

August 22, 2022

Springs Global: Revenue of R$ 317 million in 2Q22

São Paulo, August 22nd, 2022 - Springs Global Participações S.A. (Springs Global), a company in the Home & Decoration segment, leader in bedding, tabletop and bath products, reported in the second quarter of 2022 (2Q22), net revenue of R$ 317.3 million, with gross margin of 17.9%.

The highlights of Springs Global´s performance in 2Q22 were:

Net Revenue: R$ 317.3 million, -17.6% compared to the second quarter of 2021 (2Q21), and -3.3% compared to 2Q19

Gross profit: R$ 56.9 million, -59.3% year- over-year (yoy) and -39.8% compared to 2Q19, with gross margin of 17.9%, with a reduction of 10.9 p.p. compared to 2Q19

Income from operations (EBIT): R$ - 64.3 million, - R$ 83.1 million yoy, with EBIT margin of -20.3%

Adjusted EBITDA(a),1: R$ -29.5 million, versus R$ 44.8 million in 2Q21, with adjusted EBITDA margin of 9.3%

Working capital: R$ 621.3 million, -15.4% yoy, with decrease of 19.8% in account receivable and increase of 37.6% in suppliers

Sell-out revenue(b) from Retail: R$ 165.2 million, -26.0% yoy and +33.4% compared to 2Q19

Sell-out revenue from physical stores: -6.7% and +16.8% compared to 2Q21 and 2Q19, respectively, with seven additional stores yoy

Sales from e-commerce were 21% of total sell-out revenue from Retail, versus 38% in 2Q21, which was impacted by Covid-19 and led to the transfer of purchases from physical stores to digital, and 10% in 2Q19

Ex-bedding, bath and tabletop categories ("ex-BBT") were responsible for 7.9% of total sell-out revenue from Retail

Net revenue from Wholesale: R$ 227.6 million, -9.3% yoy and -15.7% compared to 2Q19, with gross margin of 5.9%

1 See reconciliation on table 4.

The financial and operational information presented in this release, except when otherwise indicated, is in accordance with accounting policies adopted in Brazil, which are in accordance with international accounting standards (International Financial Reporting Standards

  • IFRS).

Consolidated Performance

Revenue

The consolidated net revenue reached R$ 317.3 million in 2Q22, 17.6% and 3.3% lower than 2Q21 and 2Q19 revenues, respectively. In 2020 and 2021, families invested in their well-being, due to the longer stay in their homes, favoring the home & wellness sector, and in 2022, with the resumption of their routines, they directed their spending to other items such as apparel and services. Additionally, inflation has been a significant factor in the loss of purchasing power of families and in the increase in the costs of the products offered, harming, mainly, brands whose target audience is the lower-income population.

The Bedding, Tabletop and Bath(c) line was responsible for 56% of 2Q22 revenue, and intermediate products(d) for 16%. The Retail revenue contributed 28% of total revenue in 2Q22.

Revenues from the Bedding, Tabletop and Bath line amounted to R$ 177.7 million in 2Q22, 7.5% and 14.7% lower than the values recorded in 2Q21 and 2Q19, respectively. The sales volume was stable and the average price was lower due to sales mix yoy.

Revenues from intermediate products were R$ 49.9 million, 14.8% lower yoy, and with a decrease of 19.0% compared to 2Q19.

Retail net revenue totaled R$ 89.7 million, 33.2% lower yoy, negatively impacted by lower sales from e-commerce, since in 2Q21 there was a Covid-19 wave that resulted in the transfer of sales from physical stores to digital. However, there was a 53.6% increase compared to 2Q19, positively impacted by the higher penetration of online purchases, which grew almost three times between those periods.

Retail sell-out revenue reached R$ 165.2 million in 2Q22, 26.0% lower yoy and 33.4% higher compared to 2Q19.

385.0

328.2

317.3

263.3

2Q19

2Q20

2Q21

2Q22

Chart 1 - Net Revenue, in R$ million

100%

18%

28%

80%

37%

35%

19%

60%

16%

14%

15%

40%

63%

56%

49%

50%

20%

0%

2Q19

2Q20

2Q21

2Q22

Bedding, tabletop and bath

Intermediate products

Retail

Chart 2 - Revenue per product line

Costs and Expenses

Cost of goods sold (COGS) was R$ 260.4 million in 2Q22, with a yoy increase of 6.2%, mainly due to the increase in the costs of raw materials, inputs, and energy, partially offset by lower sales volume, representing 82.1% of net revenue, versus 63.7% in 2Q21 and 71.2% in 2Q19.

The main raw materials are cotton and polyester that, together with chemicals, packaging and trims, are included in materials costs, which amounted to R$ 113.0 million in 2Q22, 4.8% higher yoy, with the increase in the costs of raw materials and inputs being partially offset by lower sales volume. The average price of cotton, our main raw material, increased yoy by 51% in Brazilian Reais in 2Q22.

Cotton price - CEPEA / ESALQ

in Brazilian Reais cents per pound

900

800

700

600

500

400

300

200

01/04/2021

20/04/2021

07/05/2021

25/05/2021

11/06/2021

29/06/2021

15/07/2021

02/08/2021

18/08/2021

03/09/2021

22/09/2021

08/10/2021

27/10/2021

16/11/2021

02/12/2021

20/12/2021

07/01/2022

25/01/2022

10/02/2022

02/03/2022

18/03/2022

05/04/2022

25/04/2022

11/05/2022

27/05/2022

14/06/2022

Chart 3 - Cotton price, source CEPEA

The conversion of raw materials into finished goods requires, mainly, labor, electricity and other utilities, designated as conversion costs and others, which reached R$ 131.7 million in 2Q22, with a 8.0% increase yoy.

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Disclaimer

Springs Global Participações SA published this content on 29 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 August 2022 02:57:35 UTC.