PIPELINE - 08/15/2024
By Writing Team
Posted in August 15, 2024
Ambipar will lease the assets via leasing contracts with John Deere and Addiante and will use the proceeds from the sale to pay off debt
Ambipar has started implementing the plan announced in June to deleverage the balance sheet and bring greater operational efficiency to the company. The company has just announced a sale of 502 yellow-line machines and equipment to the CHG-Meridian group (John Deere) and 1,607 trucks to Addiante for R$ 717 million. The proceeds will be used to pay off debt, said João Daniel Piran de Arruda, Ambipar’s CFO, to Pipeline.
Ambipar will now lease the equipment and vehicles from these two companies via operational leasing, as part of its fleet renewal strategy, aiming to become a less capital-intensive company and transition to an asset-light model. Initially, Ambipar will receive both new equipment and vehicles, as well as part of those already in the fleet, at a cost of R$ 27 million per month. The leasing contract will last for five years, with fleet renewal expected within 24 months. Ambipar will be responsible for maintaining the equipment. “This is not a sale and leaseback operation; it’s a rental contract,” said Arruda.
The transaction will not only reduce financial expenses by lowering gross debt but will also reduce the operational capex expenses that the company would have incurred with equipment purchases, estimated at R$ 1.6 billion over the next two to three years.
The proceeds from the sale of the assets will be used to pay off debts tied to these equipment and vehicles, reducing the company’s financial leverage from 2.8 times at the end of the second quarter to 2.4 times. With this, Ambipar will be able to meet the guidance provided to the market in June, which aimed for a financial leverage of 2.5 times by mid-next year, said Arruda. According to him, since this is an operational lease, it will not impact gross debt, which stood at R$ 8.8 billion as of June.
The plan now is to do the same with the light vehicle fleet in Brazil, which includes cars, ambulances, and support vehicles, as well as with yellow-line assets and vehicles abroad, where the company operates in over 40 countries. “We sold assets that were not strategic for our operation,” said Arruda. The executive, who took over the role in August, already knew the company well, having participated in the IPO of Response in the United States and more recently in the renegotiation of Ambipar’s debt, which extended the average maturity of its liabilities to 5.7 years with the issuance of a bond abroad.
The company incurred financial expenses of R$ 288 million in the second quarter, impacted by non-recurring expenses, which affected the result. Ambipar ended the second quarter with a net loss of R$ 84.6 million, compared to R$ 23.4 million in the same period last year.
The company will use the revenue generated from the sale of assets to offset the losses recorded in some of the group’s companies, resulting in a neutral tax impact from the operation.
Arruda said the company ended the second quarter close to breakeven and expects positive cash generation in the second half. According to him, the fleet renewal strategy through operational leasing will help reduce the expenses on machines and equipment that have been in the fleet for a long time.
Despite the company’s shares rising by 410.7% this year, driven by the founder and Trustee purchasing shares, Arruda believes that the company is still being traded on the stock exchange at a multiple of 9 to 10 times, below international peers that trade at an average of 15 to 17 times.
