Investnews by Karina Trevizan - 10/01/2024
By Writing Team
Posted in January 10, 2024
Company prepares for higher demand with increased pressure for sustainable solutions in companies, says CFO. Ambipar unit (Photo: Press Release).
“We are well positioned to capture this.” This statement was made by the CFO of Ambipar (AMBP3) to InvestNews on Tuesday (9), the same day the Copernicus Climate Change Service (C3S) of the European Union announced that 2023 was likely the hottest year in the last 100,000 years. For Thiago Costa, the current context is one of increased demand (and pressure) from companies for sustainability solutions – in other words, the outlook is for an increase in clients.
Operating in the environmental management sector, Ambipar has expanded in recent years through mergers and acquisitions, totaling more than 40 in recent years. But, with services ranging from waste management and disposal to emergencies involving pollutant accidents, the goal for 2024 is to continue growing more organically.
The backdrop for this project includes increasingly perceptible climate changes, and “this type of discussion brings a very strong potential for the market,” says Costa. “Certainly, the market itself is increasingly concerned in this regard, also because there is popular pressure on this issue. Companies with a stronger B2C presence must have some kind of response to these themes.”
Targeting the USA
The prospect of increased demand coincides with Ambipar’s plan to focus more on the so-called “response” segment, which includes managing environmental crises, expanding these services in the United States. “We are taking all the expertise we developed here in Brazil, which we successfully replicated in Latin America, and we are bringing it to the North American market.”
One of the main objectives is to increase the company’s visibility in the United States to attract the attention of North American investors. The expansion in the country comes just a few months before the Ambipar IPO on the NYSE marks one year next March.
“Entering the NYSE is in line with what we were already thinking about the North American market. We already had this focus since our IPO. Our thesis was to expand into this market,” says Costa.
The CFO does not hide his optimism about the possibility of raising funds in the North American market – especially at a time when the debt level of Ambipar worries analysts.
“We have a very strong opportunity for visibility and to bring a robust capital structure as well, because we can have this way of raising funding that attracts us a lot.”
THIAGO COSTA, CFO OF AMBIPAR
But Costa assures that this increased focus on the United States does not represent a reduction in the company’s efforts in other areas where it operates, including its home country, Brazil. “We will not spare efforts here either, but, obviously, there is a very strong potential there. The main focus will be there, but without losing sight here.”
In this scenario, he projects that Ambipar’s greatest growth in the coming years will come from another segment, called “environment,” specifically in actions targeting the circular economy (a logic that includes the reuse of waste for new productions).
“We are indeed very optimistic about this market, a very embryonic market, as I mentioned. And a market where I believe we will have a higher growth rate.”
The debt warning
The growth path through mergers and acquisitions has cost Ambipar a level of debt considered high by analysts. The company closed the third quarter of 2023 with a net debt of R$ 4.49 billion, an increase of 46% compared to the previous year.
A survey by the Valor Pro platform shows that Ambipar has sustained debt levels above the sector. Considering the data over 12 months, the last indicator of the debt-to-Ebitda ratio (Earnings Before Interest, Taxes, Depreciation, and Amortization) was 3.56, compared to 1.88 for other companies. The number shows the relationship between the company’s debt and its ability to generate cash.
This is the main factor behind Ambipar’s decision to slow down acquisitions to continue growing. “We understand that it is time to take our foot off the accelerator. So, we are now much more focused on organic growth,” says Costa.
It is worth noting that the company recently also went to the market to try to improve its leverage numbers. Last year, the company conducted a follow-on (secondary stock offering), raising almost R$ 717 million. “We saw the need to increase cash a bit, aiming to reduce net debt, that was our intention with this follow-on,” recalls Costa.
The operation raised concerns among investors given the pricing of the shares near historical lows. “Yes, there was the follow-on, and there was this historical low, but it is part of the market and we understand that when we manage to demonstrate all the potential that Ambipar has, it will certainly be recognized,” continues the executive.
Ambipar had a net profit of R$ 34.8 million in the second quarter of 2023, totaling a positive result of R$ 4.5 billion in the first nine months of the year – an increase of 45.9% compared to 2022.
To keep the balance sheets in the black and the company growing, Costa says the main challenge is “not missing opportunities.” “The addressable market is enormous, it is a topic that is in vogue. We talk about how the planet needs to be taken care of more vehemently so that we can actually do something transformational. And we are here to help, both our clients and the planet itself,” he says. “There is no Planet B, we have to take care of Planet A.”
