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WABERER'S INTERNATIONAL NYRT.

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Waberer International : Analyst conference call transcript

05/12/2021 | 06:02am EDT

FIRST QUARTER 2021 RESULTS ANALYST CONFERENCE CALL TRANSCRIPT

10 MAY, 2021, 11:00 CET

[Presentation slides available here]

Slide 1:

Moderator: Ladies and gentlemen, welcome and thank you for joining Waberer's Q1 2021 Results

Analyst Conference call.

My name is Viktor Majzik and I'm the IR Manager of Waberer's. Mr Barna Erdélyi (Waberer's Group CEO) and Mr Szabolcs Tóth (Group CFO) is also present from Waberer's side at the call.

The conference call will last roughly 60 minutes including both the presentation and Q&A session.

I kindly ask everyone to mute their microphone during the presentation and only turn it on during the Q&A session. In case you would like to raise a question, please either write into the Chat window of Microsoft Teams application, or pls indicate in the Chat window that you would like to raise a question verbally or use the "Raise your hand" function in the Teams application

I would now like to turn the conference over to Mr Barna Erdélyi. Please go ahead.

Barn Erdélyi (CEO)

Good morning everyone. Thank you very much for joining us today and let me welcome you to our first quarter results conference call.

Slide 3:

Barna Erdélyi (CEO)

Let me first start today presentation with some insights about the results of the turnaround both at Group level and also at ITS segment level. After that I would like to give you a short summary about the major challenges that we face currently and that everybody can read at the major newspapers.

Slide 4:

Barna Erdélyi (CEO)

As a summary of our first quarter of 2021, I can tell you that

  • The success of the Group turnaround project continues, and we managed to generate positive and growing recurring EBIT for the 3rd consecutive quarter. The trend was supported by all segments as ITS and RCL segment and our insurance activity all outperformed the results of the first quarter of last year.
  • Group level reported EBIT reached EUR 4.5 million in the first quarter of the year and reported Net Income was EUR 2.7 million which are the highest values since 2017. RCL and Other segment significantly improved their operative margins at stable revenue base while loss of ITS segment has also been decreasing step-by-step since the launch of the new Trade Lane model.
  • After we left the major waves of BREXIT at the beginning of the year behind us, both the
    Hungarian based and the Polish based operation of ITS segment reached positive EBIT in March that also symbolizes the success of the turnaround. We still have lots of homework for the rest of the year to stabilize the performance of the segment but the already achieved results prove, that the strategic directions are right
  • In the recent months we had to handle some global challenges that are expected to stay with us in the coming months - namely the Brexit, the pandemic situation and the global supply chain turbulences. I will introduce the effects of them on our operation in the later phase of the presentation but I can tell you shortly that all of them generated some issues in our everyday job but we do not expect any long term negative effect of them.

In a short summary, despite the challenges around us, Waberer's Group performed the best quarter since 2017.

Slide 5:

Barna Erdélyi (CEO)

On the following 2 slides, I would like to demonstrate the trend and the results of the Company turnaround both on Group level and on ITS level.

On the above chart, the Group level recurring EBIT is presented since 2018 and the last 3 quarters are marked with a grey box, as this the period, when the Trade Lane model in the ITS segment has been part of our operation. All 3 predefined strategic goals - namely I. Launch of Trade Lane model at ITS; II. Increasing weight of stable profit making RCL and insurance segments III. Increasing margin level in the RCL segment - together resulted in the positive trends and we are satisfied that the growing trend is visible not only on a year-on-yearbasis but quarter-by-quartergrowth is also clearly recognizable.

Parallel with the improving financial results, the Company managed to decrease net indebtedness position of the Group that is presented on the below chart. After a technical decrease in the indebtedness calculation at the end of 2019 - namely the buyback value of the vehicles are not capitalized any more in the ITS segment - the net indebtedness and leverage position decreased by 60% since the end of 2019 that means turnaround in the operating results didn't require additional financial resources but operating results and leverage position improved parallelly.

As noted previously and Szabolcs will also talk about it later, we do expect some increase in the gross indebtedness position from the end of the year due to the restart of the fleet replacement program but the effect of it on the leverage position is significantly lower compared to the decrease we achieved in the last 2 years.

Slide 6:

Barna Erdélyi (CEO)

Turning to the results of the Turnaround project at the Hungary based operation of ITS segment, first of all on Page 6 I would like to present to you the quarterly recurring EBIT of the segment.

Segment EBIT is continuously improving since the launch of the Trade Lane model - that also resulted in the turnaround at Polish-basedoperation 1 year before - and reached EUR -2.3million in the first quarter of 2021. The beginning of the quarter was influenced by BREXIT not only on UK relation but in the all continent as several competitors reallocated their fleet from UK related routes to the continent. However after the consolidation of UK relation on the administration side for entering and leaving the UK and on the customer side for accepting the additional duties regarding serving them in the UK, the ITS Hungary segment managed to reach a positive EBIT in the last month of the quarter that is - naturally - the final goal of the all turnaround process.

To demonstrate the operational improvement of the segment, I also would like to present to you the quarterly change of the net revenue generating capability of our fleet that we consider as one of the major KPIs of the operation. Net revenue consists of the revenue generated by the fleet and decreased by the fuel and transit costs. We believe that instead of focusing on pure KM or pure pricing related KPIs, net revenue is the efficiency KPI that best describes the effectiveness of the fleet and net revenue should cover the fixed costs (like insurance, repair, wages, etc.) to reach an overall profitable operational level. As a result of the Trade Lane model where standalone Business Units were set up to focus on dedicated customers in certain geographical areas, we can parallelly manage different business strategies that are successful on different geographical areas. For example, Spain related destination is characterized by lower price level but really high km while UK-France relation is characterized with short distance orders but significantly higher price level. The standalone accountability of these routes give us the opportunity to separately measure and manage these markets with special characteristics but all these specialties can be aggregated to the net revenue generating capability of the fleet.

As you can see on the below chart, net revenue generating capability of the fleet improved by 11% since the first quarter of 2020 that was the last quarter before the pandemic so clearly symbolizes the efficiency improvement of the fleet.

We are mostly talking about improvement of the fleet when we are describing the turnaround but I also have to emphasize that our forwarding activity - when we are cooperating with subcontractors for executing certain destinations where we have a temporary capacity shortage or not in the focus on our own fleet operation - also improved in the recent months and we expect to grow in terms of revenue and of EBIT generating capability.

Slide 7:

Barna Erdélyi (CEO)

On page 7, we summarized all the external factors that mostly influences our daily life and we expect to stay with us in the coming months and most of them are also in the headline of the daily news.

  1. Covid19 - The effect of the current wave of the pandemic is not comparable to last year's lockdown neither in the ITS nor in the RCL segment. Not any extraordinary measures had to be implemented this year and the current level of the pandemic has been mostly generating us challenges in the daily operations in the last few months due to the unexpectable changes of COVID related regulations at certain countries and partners. Fortunately, our colleagues were not infected in a way that would have risk seriously our operation and didn't materially affected our financials. We also provide vaccinations to our colleagues that is a big help especially to our truck drivers who cannot visit their doctor to get the vaccine.
  1. Brexit - The first weeks of the year generated the highest challenges in the UK related transportation however chaos was far not as big as it was expected in advance. As the UK destination is a key market for both our Polish and our Hungary based operation of the ITS segment we were prepared for the additional administrative duties and - unlike some of our competitors - we were able to maintain our service in the UK-related Trade Lane. The UK border crossing related duties mostly consolidated in the recent period however time demand of the process increased compared to the pre-Brexit times. I also have to add that our British partners accept our additional tasks regarding serving them and the cost of additional time and administration is already reflected in the prices. Long term effect of the Brexit could be partly the possible restructuring of the UK economy and partly the competition level could also stay on a lower level in case some of the market players - mostly the smaller operators - don't come back to this direction anymore.
  1. Global supply chain destructions - Our partners mostly complain about the periodic shortage of chips necessary for manufacturing of automotive and electronic products and also the periodic and imbalanced availability of containers necessary for the global supply chain. Based on our experiences until now, our customers are not equally and not in the same period affected by the shortage that means we are flexibly able to reallocate our fleet in case there is a few day long factory shutdown at certain locations. Therefore the effect is not yet material on our financials. In long term we expect that the global supply chain processes will be either cured in a few month time or - in case this would generate a long term risk for our manufacturing partners
    - they will relocate their production closer to their European consumers that will generate additional demand for our services

IV.

Last external challenges I would like to talk about is the EU level regulation regarding the so-

called Mobility package and driver's minimum wage regulation. The introduced EU level

regulation is not as new as the previously mentioned factors so Waberer's Group had the

opportunity to prepare for them and we are compliant with the current regulation. Major points

of the regulation are focusing on how often the drivers need to go back to their home country

and that salary of the drivers should reach the local minimum wage of the European countries

where the trucks operate - namely the German, the French, the Belgium minimum wage level,

etc. We believe that the regulation negatively affects mostly those market players who are

coming from Eastern borders of the EU - namely from Romania, Bulgaria, Turkey or Baltic

countries who were competing by extra low price level - mostly due to their low wages - and

the expectation to go home regularly is also a significant challenge for them due to the high

distance of these countries from the major industrial zones of Europe. The decrease of their

competitiveness on the Western-European markets could normalize the level of competition

and we expect a price consolidation effect in midterm.

Slide 8:

Barna Erdélyi (CEO):

And now, I would like to ask Szabolcs to dig into the details about the financials and show the performance of both the Group and the Segments.

Slide 9:

Szabolcs Tóth (CFO)

Thank you, Barna. I also welcome everyone on the call.

On the first financial slide, I would like to give you a Group level summary of Q1 2021 results.

As you can see on the top Chart, Group level revenue was stable compared to previous quarter at EUR 142 mn but decreased by 18% compared to the first quarter of 2020. The decrease compared to Q1 2020 principally reflects Waberer's adoption of the new Trade Lane strategy in our ITS segment under which we focus on serving selected trade routes and customers with lower fleet size.

As you can see on the left bottom chart, Group level quarterly recurring EBIT increased by EUR 4.4 million compared to first quarter of 2020 and reached EUR 4.5 million that is the highest since last quarter of 2017 that confirms the new strategic direction of the Group. All 3 segments managed to improve their profitability in the quarter compared to Q1 2020 that was still the last quarter not yet affected by the pandemic situation in Europe.

I also have to add here that non-recurring items were not incurred during the quarter.

Last but not least, in the first quarter of 2021, Waberer's Group managed to reach EUR 2.7 million recurring Net Income that is EUR 5.2 million improvement compared to the same period last year.

Slide 10:

Szabolcs Tóth (CFO)

On the next slide, I present to you the segment based performance in the first quarter of 2021.

Starting with ITS segment, revenue was stable compared to the previous quarter, however decreased by 27% compared to the same period of last year as a result of the adoption of the new Trade Lane business model in the Hungary based operation of the segment in July 2020 that is served by roughly 30% lower fleet size on segment level. As Barna already introduced to you the improving EBIT trend of the Hungary based operation of the segment, I can also present that recurring EBIT of whole ITS segment- including both the Hungarian and Polish leg as well as the ITS related part of the insurance activity - also improved by an impressive EUR 2.5 million compared to Q1 2020. Moreover, after the challenging first month after Brexit, ITS segment generated positive EBIT in March that has been the best performance for a long time.

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Waberer's International Nyrt. published this content on 12 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 May 2021 10:01:05 UTC.


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Financials
Sales 2021 606 M 711 M 711 M
Net income 2021 15,0 M 17,6 M 17,6 M
Net Debt 2021 - - -
P/E ratio 2021 -
Yield 2021 -
Capitalization 118 M 138 M 138 M
Capi. / Sales 2021 0,19x
Capi. / Sales 2022 0,19x
Nbr of Employees 5 919
Free-Float 26,8%
Chart WABERER'S INTERNATIONAL NYRT.
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Income Statement Evolution
Managers and Directors
Barna ErdÚlyi Chief Executive Officer
Szabolcs Tˇth Chief Financial Officer
Mike Ferenc Chairman-Supervisory Board
Zsolt Barna Chief Operating Officer
David William Moffat Thompson Member-Supervisory Board
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