• Revenue Growth: Increased by 1.7% in EUR terms, reaching EUR 1,523 million.
• EBITA Margin: 11.8% for the first nine months, with a quarter-on-quarter improvement of 70 basis points in Q3.
• Net Profit: Increased by 4.1%, totaling EUR 66 million.
• Free Cash Flow: EUR 63 million generated in Q3, bringing the year-to-date figure to EUR 92 million.
• Net Financial Debt: Reduced by EUR 28 million to EUR 898 million.
• Transformation Products Penetration: Increased to 32.1% of total sales, with a growth rate of 12.7% in EUR terms.
• Sales by Region: Latin America decreased by 1% to EUR 932 million; Europe increased by 9.1% to EUR 492 million; Asia Pacific decreased by 6.1% to EUR 99 million.
• Earnings Per Share: Improved by 4.5% to 4.32.

• Warning! GuruFocus has detected 7 Warning Sign with XMAD:CASH.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Prosegur Cash SA (XMAD:CASH) reported a 1.7% increase in sales in EUR terms, with organic growth reaching 2.2% when excluding inorganic operations.
• The company achieved a free cash flow generation of EUR 63 million in Q3, bringing the year-to-date figure to EUR 92 million, indicating strong cash flow performance.
• Net profit increased by 4.1% due to lower financial costs and a reduced tax rate, despite challenges in EBITA.
• Transformation products have increased their penetration to 32.1% of total sales, showing a 12.7% growth on a like-for-like basis.
• Prosegur Cash SA (XMAD:CASH) has reduced its net financial debt by EUR 28 million, showing a positive trend in leverage ratio improvement.

Negative Points

• Currency devaluation, particularly in Argentina, continues to negatively impact financial results, affecting EBITA and sales growth.
• The EBITA margin decreased compared to the previous year, primarily due to currency effects and restructuring costs in Australia.
• Sales in Latin America, which represent 61% of total sales, decreased by 1% due to significant currency impacts.
• The Asia Pacific region saw a 6.1% decrease in revenues, driven by the deconsolidation of Australian operations.
• Despite improvements, the total net debt to EBITA ratio remains at 2.9 times, still affected by previous year's challenges.

Q & A Highlights

Q: What should we expect for Q4 given the current situation in Argentina and the Peso, and are there any serious consequences from the Cooperation Agreement announced yesterday? A: We expect a significant improvement in Q4 compared to last year, with consensus estimates slightly below EUR 2 billion in sales and EUR 250 million in EBITA. We believe we can exceed these estimates under a normalized FX scenario. The Cooperation Agreement is a formality with no significant underlying changes. Regarding leverage, we expect to be within our 2.5 times internal threshold by year-end, with further improvements in 2025. (Javier Hergueta, CFO)

Q: Is the positive cash flow generation in Q3 due to seasonality, and can we expect this trend to continue in Q1 and Q2 next year? A: The positive cash flow in Q3 is due to strong discipline in collections, payments, and CapEx prioritization. We expect Q4 to maintain this trend. While seasonality will still affect Q1 and Q2, stabilization in Latin America should reduce working capital consumption, supporting positive cash flow generation. (Javier Hergueta, CFO)

Q: What are the trends in organic revenue growth, and are there any changes in underlying volume trends? A: The minimal deterioration in organic growth is due to a tougher comparable base. Excluding Argentina, we see mid to high single-digit organic growth, balanced between price and volume. This trend is consistent across regions, with strong growth in Europe and Asia Pacific. (Javier Hergueta, CFO)

Q: Can you provide insights into profitability trends, particularly in Argentina and the impact of new initiatives? A: Excluding Argentina, the rest of the business shows improving profitability. The impact from forex openings and Australian restructuring will dilute by year-end, with no major openings expected in 2025. We anticipate gradual improvement in EBITA margins, bridging the gap to previous levels. (Javier Hergueta, CFO)

Q: Does the guidance for 2024 include any appreciation of the Peso in Q4? A: We don't have a crystal ball, but market consensus suggests the Peso will maintain a roughly 2% monthly devaluation, which aligns with government announcements. This is the reference we are using for our guidance. (Javier Hergueta, CFO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.