Exame by Raquel Brandão - 03/29/2023
The company reported strong operational numbers, with revenue growing 75% in the fourth quarter, but high interest rates reduced profits by 56% in the period.
The year of high inflation and interest rates reaching 13.75% challenged companies and the stability of their businesses, but even so, some managed to report strong operational numbers, such as Ambipar (AMBP3), whose revenue in the fourth quarter grew 74.6% to R$1.19 billion.
Much of this number, true, came from acquisitions, such as the incorporation of Witt O’Briens, purchased in September by the company’s subsidiary in the United States, Ambipar Response. Nevertheless, as highlighted by the Chief Financial Officer, Thiago Costa, the numbers were robust. “We managed to create a self-sustaining ecosystem.” For the year, net revenue grew by 98% to R$3.79 billion.
The company’s EBITDA grew by 88% in the quarter to R$349.8 million, while it advanced by 102.5% for the year, reaching R$1.05 billion. However, the negative financial result of R$179.4 million in the quarter weighed on the bottom line, and Ambipar’s profit in the fourth quarter was 56% lower at R$22.7 million. For the year, the accumulated decline was 35.7%, amounting to R$108.7 million.
According to the CFO, the difference in the behavior of operational numbers, such as revenue, and net income is due to higher inflation and rising interest rates. The group is able to offset inflation through contract adjustments, which does not substantially impact revenue growth.
However, interest rates hurt the bottom line. As mentioned above, the financial result was negative at R$179 million, 231% worse than a year before. If the numbers for the whole year are observed, the deterioration is more evident: the financial result worsened by 380%, resulting in a financial loss of R$509.3 million.
In addition to the cost of existing debts, the higher cost of capital to drive operations and expenses related to investments and acquisitions also weigh on the company. Therefore, the company states that, with the increase in the weighted cost of capital for companies, it will be even more cautious in investments. “We see it as a year of capital employment with caution, but a year of growth that exists regardless of the scenario,” says the CFO.
According to him, the net debt position is not a concern because the operational return has shown that the resources have been well allocated. Now, with the IPO of Ambipar Response in New York, the company’s leverage, which reached 2.8 times at the end of the fourth quarter, is expected to return to 2.5 times in the first quarter.
Undervalued shares and potential market
In the past 12 months, Ambipar’s shares have depreciated by nearly 50%, leading to a market value of R$ million. This amount is lower than the stake it holds in its subsidiary, which recently went public on the NYSE (New York Stock Exchange), Ambipar Response.
“We carried out the opening of Ambipar Response in New York, and it showed that there is a very strong discount in value here. How can a division have a higher market value than the holding company? But over time, we believe that this valuation gap will close,” argues the executive.
Part of this movement to close this valuation gap has to do with the addressable market and the growth potential of the market in which the company operates. According to a study commissioned by the company with EY, this waste management and environmental services market is growing, and Ambipar only holds 1.9% of the potential market in Brazil. “Our market share is still low, which is why there is enormous growth potential. We have waste players, but they are very focused on disposal alone. So it’s a well-fragmented market,” he says. According to him, this potential also lies in cross-selling services to its entire customer base, which currently exceeds 10,000 companies.
