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Investor Presentaiton

118 FINANCIAL CAPITAL 2021 INTEGRATED ANNUAL REPORT New brands in M. Dias Branco portfolio VERTICAL INTEGRATION The Company produces most part of its two main raw materials used for the production of its products. In 2021, 99.7% of all wheat flour and all vegetable shortening used in the production process were manufactured in-house (98.5% and 99.3% in 2020, respectively). GROSS PROFIT In 2021 versus 2020, gross profit in nominal amounts decreased 7.5% and gross margin retracted 4.6 pp, from 32.8% in 2020 to 28.2% in 2021. The drop reflects the rise in raw material prices in dollars, the 14.3% drop in volumes sold and the depreciation of Brazilian real against the dollar. OPERATING EXPENSES Comparing 2021 versus 2020, operating expenses showed 8.0% growht in absolute terms. However, selling and administrative expenses decreased 7.1% and 4.6% respectively, with lower representation on net revenue, evidencing the effectiveness of the gains from Multiplique project and short-term initiatives presented in early 2021. Additionally, we recorded a favorable non-recurrent result of R$ 87.5 million (R$ 73.4 million Wheat flour Shortening 0.3% 0.7% FRONTERA FRONTERA 0.3% 1.5% 99.7% 99.3% 99.7% 98.5% 2021 2020 2021 2020 Own Production External Source Gros Profit (R$ million) and Gross Margin (%) 32.8% 28.2% 2,381.0 2,202.0 28.6% 31.4% 26.8% 27.8% 26.2% 685.5 549.8 566.7 487.2 400.0 Gross Profit Gross Margin 4Q20 1Q21 2Q21 3Q21 4Q21 2020 2021 Operating Expenses (R$ million) 2021 % NR 2020 % NR HA% Sales* 1,400.9 17.9% 1,508.6 20.8% General and Administrative Donations 242.8 3.1% 254.4 3.5% Tax 27.1 0.3% 30.8 0.4% 22.2 0.3% 32.0 0.4% 22.1% -3.8% Depreciation and amortization Other oper. exp./ (rev.) 102.4 1.3% 83.1 1.1% 23.2% HA -% NR -7.1% -2.9 p.p. -4.6% -0.4 p.p. O p.p. O p.p. 0.2 p.p. 10.3 Total 1,793.7 -0.1% (239.4) -3.3% 23.0% 1,660.9 22.9% 8.0% -95.7% -3.4 p.p. 0.1 p.p. *Salaries and benefits, freight and other marketing, sales force and logistics expenses. Note: In the Statement of Profit or Loss, depreciation and amortization expenses were included in the respective selling and administrative expenses, and tax expenses were added to other net expenses (revenues). For more information, see Note 29 of the financial statements for the year ended December 31, 2021. of income with extemporaneous tax credits, R$ 9.9 million with adjustment of the acquisition value of Piraquê, and R$ 4.2 million with other recoveries) and R$ 47.9 million of non- recurring expenses (R$ 41.5 million with restructuring, R$ 3.5 million with covid-19 expenses and R$ 2.9 million with Latinex). In 2020, R$ 348.5 million in revenue from extemporaneous tax credits and R$ 44.4 million in non-recurring expenses were recognized, influencing the change between 2020 and 2021. TAX INCENTIVES (ICMS) GRI 201-4 Tax incentives (ICMS) are transferred to the result in compliance with CPC 07 and IAS 20- Government Subsidies. Most of them are calculated based on the amount of ICMS computed in the production cost, and allocated in the Fiscal Year Income Statement, below the cost of goods sold. In 2021, the amount recognized by the FIT FOOL FIT FOOD FIT FOOD VEGGIE CHIPS VEGGIE CHIPS yrrells Tyrrells salt & MAPLE SYRUP Company was R$ 436 million (R$ 391.8 million in 2020). As of March 2021, the Company was also entitled to Fundopem (Fundo Operação Empresa do Estado do Rio Grande do Sul), a partnership instrument aimed at promoting the social and economic development of the State of Rio Grande do Sul. Thus, in 2021, the amount of R$ 5.8 million was recognized in other operating income. FINANCIAL RESULT In 2021, the Company recorded a negative financial result in Financial Results (R$ million) FX Variation Islack truffle the amount of R$ 19.8 million, versus a positive result of R$ 81 million in 2020. The change was mainly influenced by the increase in financial expenses with interest and inflation adjustment on debentures issued in 1Q21, in addition to the drop in financial revenues with the lower inflation adjustment on extemporaneous credits, in contrast to the increase in income from financial investments, as a result of the hike in CDI. 2021 2020 HA% Financial revenues 166.4 182.3 -8.7% Financial expenses (186.1) (92.5) n/a (52.4) (168.6) -68.9% Losses / gains on derivatives 63.7 172.7 -63.1% Changes in fair value of financial (11.4) (12.9) -11.6% instruments Total 19.8% 81.0 -124.4%
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