Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grupo Traxion SAB de CV (GRPOF, Financial) reported record high revenues and EBITA figures for the third quarter of 2024.
- The company executed a binding agreement to acquire Solistica, which is expected to significantly enhance its logistics and technology division.
- The acquisition of Solistica is anticipated to increase the logistics division's contribution to more than 50% of consolidated revenues by 2025.
- The company has maintained a strong cash position with a leverage ratio below 2.5 times, adhering to its self-imposed limit.
- Grupo Traxion SAB de CV (GRPOF) has shown significant improvements in ESG ratings, including a higher Carbon Disclosure Project rating and a better score in the Standard and Poor's Corporate Sustainability Assessment.
Negative Points
- The company incurred non-recurrent expenses related to organizational restructuring, particularly in the last mile business.
- There are pending non-recurring expenses expected in the fourth quarter related to the efficiencies program.
- The mobility of personnel division has experienced increased costs, impacting overall expenses.
- Grupo Traxion SAB de CV (GRPOF) plans to divest from Brazilian and Colombian operations of Solistica, indicating potential challenges in international operations.
- The company is considering a more conservative approach to CapEx in 2025, which may impact growth initiatives.
Q & A Highlights
Q: How are you seeing the demand trends for 2025, and what are the expected expenses related to the B2C business?
A: The outlook for 2025 shows strong demand activity, enabling us to close many contracts for next year. We are considering being more conservative with CapEx, focusing on the growth of the logistics and technology division, which requires less CapEx. Regarding expenses, we expect non-recurring expenses related to restructuring to be between PHP 20-30 million in the fourth quarter.
Q: How sustainable are the improved margins seen this quarter, and when can we expect a more normalized cost evolution for the mobility of personnel division?
A: The margins seen this quarter are expected to be sustained into the fourth quarter. For the mobility of personnel division, we anticipate recovering margins by the fourth quarter, with pre-operating expenses becoming less significant.
Q: Can you provide more details on the synergies expected from the Solistica acquisition and the cash flow generation trend for next year?
A: We expect immediate synergies at the corporate level, with around PHP 50 million per year going straight to the bottom line. There are also strong commercial synergies due to different regional presences and client bases. For cash flow, we aim for positive operating cash flow next year, with less CapEx as a percentage of revenues.
Q: Are there any plans to ease off on M&A activity following the Solistica acquisition, and how will it be financed?
A: We plan to focus on integrating the Solistica acquisition and are not planning further acquisitions at this time. The acquisition will be funded through Traxion's cash flow, keeping the leverage ratio below 2.5 times, which is our internal policy.
Q: What are the underlying trends for Transportadora, and how will the Solistica acquisition impact it?
A: The Solistica acquisition is expected to significantly increase Transportadora's volume, potentially tripling its size next year. This presents a substantial opportunity for growth in the transport segment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
