Irani Papel e Embalagem (RANI3) Q3 2024 earnings summary

Executive summary

• Net revenue reached BRL 426.4 million in Q3 2024, up 4.5% year-over-year and 8.4% sequentially, driven by higher volumes and price increases late in the quarter, especially in Sustainable Packaging.

• Net profit was BRL 37.6 million, down 41.8% year-over-year, mainly due to higher OCC/scrap costs, increased depreciation from Gaia platform investments, and lower biological asset variation.

• Adjusted EBITDA was BRL 125.3 million with a margin of 29.4%, down 6% year-over-year but up 6.1% sequentially, reflecting cost pressures and operational gains from Gaia projects.

• Sales volumes in corrugated cardboard grew 6.1% year-over-year and 10.9% sequentially, outperforming the market.

• Multiple awards received for transparency, innovation, and workplace quality, including the Anefac Transparency Trophy and GPTW Brasil ranking.

Financial highlights

• Gross profit was BRL 156.0 million, with a gross margin of 36.6%, down 10.1 p.p. year-over-year.

• Net debt/adjusted EBITDA was 2.26x, with net debt of BRL 1.065 billion and 91% of debt long-term.

• Dividend yield over the last twelve months was 4.36%, with R$0.55 per share distributed.

• Adjusted free cash flow was R$32.2 million, a 69.8% decrease sequentially, mainly due to higher interest and tax payments.

• Cash position at quarter-end was R$586.1 million, with 98% of gross debt in local currency.

Outlook and guidance

• Expectation of stable or slightly lower OCC/scrap prices starting late Q4 2024 or early 2025, supporting margin recovery.

• Strong demand for corrugated cardboard and flexible packaging expected to continue into Q4 and 2025, especially in the food and animal protein sectors.

• 2025 anticipated to be better than 2024 in terms of pricing, margins, and volumes, with improved ROIC as Gaia investments ramp up.