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Despite the impacts of the pandemic on the global economy, Votorantim was able to maintain its investment grade rating by two credit risk agencies, Standard & Poor’s and Fitch Ratings, joining a select group of companies. Also, Moody’s changed Votorantim’s outlook to stable from negative due to the company’s operating performance, which was stronger than had been expected at the start of the COVID-19 crisis.
The impact of the pandemic on the company’s results was a recurring subject of inquiries from investors throughout the year. Initiatives to combat COVID-19, both internal and external to society supported by Votorantim, were broadly publicized, including to the investors.
The high degree of transparency that marks Votorantim’s relationships with investors, analysts and creditors-in line with listed companies-was demonstrated in a series of earnings conference calls, which were held in place of in-person events (Votorantim Days in São Paulo and New York, which were canceled in compliance with the requirement to social distancing). The Investor Relations website, published in Portuguese and English, continued to be available; it contains, among other information, the company’s operational and financial results and communications to the market.
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Despite the effects of the COVID-19 pandemic, the portfolio companies maintained their operational stability, ending 2020 with results above what was forecasted at the beginning of the pandemic. Their speed in responding to the impacts of the crisis, by implementing contingency plans and increasing their liquidity levels, the strength of the companies and the historical prudence with which Votorantim has conducted its businesses were some of the factors that ensured that healthy financial metrics were maintained.
In the consolidated view, Votorantim’s results consider the operations of Votorantim Cimentos, Votorantim Energia, Nexa, CBA, Acerbrag and Acerías Paz del Río. The results of banco BV and Citrosuco are reported according to the equity method.
Net revenues at the end of the year was R$ 36.7 billion, 19% higher than in 2019. The growth was mainly driven by the better operating results of the cement and metals businesses and by the devaluation of the real against the US dollar, which had a positive effect on the consolidated results of operations abroad.
Votorantim Cimentos had higher sales volume in all regions and positive price dynamics, mainly in Brazil and North America. Nexa benefited from the positive effect of metal prices in BRL. CBA had the highest sales volume, thanks to the consolidation of the operations of Itapissuma, in Pernambuco state. All of these factors had a positive impact on consolidated net revenues.
Adjusted EBITDA totaled R$ 6.9 billion, an increase of 35% compared to 2019, also reflecting the better operating results.
Votorantim ended the year with a net loss of R$ 3.1 billion, compared to a net income of R$ 4.9 billion in 2019. This result is mainly explained by the impairments of Nexa assets to the amount of R$ 2.5 billion in 2020 and the impact of the exchange rate on indebtedness. In 2019, the result was impacted by the positive effect of Fibria transaction. These effects were partially offset by better operating results, which were reflected in an increase in net revenues and adjusted EBITDA.
In 2020, operating cash flow was positive at R$ 3.3 billion, as a result of improved operating results, which, in turn, had an effect on working capital, mainly at CBA and Votorantim Cimentos.
Free cash flow (FCF) totaled R$ 4.1 billion, with a negative variation of R$ 822 million compared to 2019 (R$ 4.9 billion), mainly explained by the effect of the Fibria transaction in 2019. There was also the positive effect of the exchange rate variation on the cash position of approximately 60% in foreign currency.
Liquidity and Indebtedness
At the end of 2020, gross debt totaled R$ 25.1 billion, an increase of 27% over the previous year. The variation is mainly due to the devaluation of the real against the US dollar on foreign currency debt. Cash, cash equivalents and short-term investments totaled R$ 15.4 billion, 40% of which is in reals.
Votorantim and Votorantim Cimentos also have two Revolving Credit Facilities (RCF), both available for withdrawal and maturing in 2023, totaling US$ 700 million combined, thereby strengthening consolidated liquidity of R$ 19.1 billion in 2020.
Net debt was R$ 11.3 billion, 13% higher than in December 2019. Financial leverage, measured by the net debt/adjusted EBITDA ratio, was 1.63x, a drop of 0.31x in comparison with the previous year and the lowest since 2008.
In December 2020, Votorantim announced the early settlement of the last bond maturing in April 2021. With this transaction, there is no more outstanding debt at the holding company level.
Investments
Capex totaled R$ 3.5 billion, 10% higher than in 2019. The expansion projects represented 36% of the total investment.
Of the total expansion investments, 90% was used by Nexa for the development of the Aripuanã project, in Mato Grosso state, which includes an underground polymetallic zinc mine and a processing unit that are both expected to be completed in 2021.
Votorantim Cimentos’ expansion projects accounted for 9% of the total invested, including the expansion of the grinding plant in Pecém, in the northeast of Brazil, which will add 800,000 tons to its current capacity.
