IMC sells operation in Panama for US$ 40 million to simplify enterprise

CEO’s plan is to lighten the company, including in debt, for expansion in Brazil

The International Meal Company (BMI), owner of the brands Roast Chicken, Pizza Hut and KFC in Brazil, has just completed a relevant step in the execution of the strategy defined after the company gained a reference shareholder, Faro Capital, and changed management. At the end of last week, the company signed the sale of the Panama airport operation for US$ 40 million, just under R$ 210 million at current exchange rates.

“I came with a very clear focus on what I had to do: the transformation of IMC. The first big banner was efficiency, resuming sales and profitability, in the post-pandemic period. I focused a lot on the first efforts and changed the management team. At the same time, it was necessary to take care of financial discipline and simplify the operation”, says the CEO, Alexandre Santoro, who arrived in March 2021 and has given few interviews since then.

To get an idea of ​​the relevance of the transaction, the sale value is equivalent to almost 40% of the market value of IMC on the Brazilian stock exchange, valued at R$ 556 million at the close of trading on Friday.

Santoro says that, since his arrival, he has heard from investors and creditors that the plan to put the company on track — efficiency, financial discipline and less complexity — makes a lot of sense. But everyone wanted to see execution. Hence the importance of business. He demonstrates that the company is on the path outlined and that the next steps, improving the conditions of liabilities, extending the debt, and resuming expansion plans, will soon take their turn.

“IMC was founded in 2006 and had a very clear thesis of consolidating this so dispersed sector that is food outside the home. But, along the way, acquisitions were made that do not bring synergies”, recalls the executive. The Panamanian operation was in that case. Despite being profitable, the company does not see great scalability, nor does it make sense to allocate more capital in that country.

In addition to Panama, IMC is still active in the United States, with the MargaritaVille and Land Shark brands, which is relevant as a whole and continues to expand, with an annual Ebitda of around US$ 20 million. “Here is another sign of the distortion of value in the sum of the parts. This deal alone, depending on the multiple applied, is worth more than the entire IMC at B3 today”, highlights Santoro. And there is still a much smaller presence in Colombia, which is another candidate operation to be sold in the simplification process. “There must be a good opportunity”, explains the executive.

Regarding the activity on American soil, Santoro says that the plan is for Brazil to grow and become increasingly important, but that, for now, the United States should still remain in the portfolio for a while longer. Food retail in that country is far from a mystery to the CEO. Before taking over IMC, he headed Popeye’s, owned by the RBI group, an investment by the trio of 3G Capital. Faro Capital is a manager of family assets and the operation is led by Lucas Rodas, one of the founders of Sagatiba, and son-in-law of Carlos Alberto Sicupira.

In the second quarter of 2022, IMC’s net revenue totaled BRL 621 million, 40% more than in the same period last year. Furthermore, the amount is almost 20% higher than the same pre-pandemic range. Recurring Ebitda from April to June totaled around R$80 million, 74% higher in the annual comparison. In the first six months of this year, free cash flow, after investments, exceeded R$ 65 million, that is, it was 475% higher than from January to June 2021, when the pandemic was still restricting the movement of people and the operation of different establishments.

At this point, due to the high interest rate scenario, carrying debt is expensive and resource consuming. Therefore, reducing commitments is something Santoro considers a short-term focus. IMC ended June with a net debt of R$ 298 million, almost double the position in December, but with the leverage ratio over Ebitda within the limits established by the creditors. The indicator closed the quarter at 2.7 times and the ceiling is 3.0 times.

Debt service payments rose almost 190% year-on-year and cost more than R$38 million in the second quarter. This line contains a good part of the explanation for the company having recorded a loss in the period, of R$ 4.7 million. As the house is being tidied up, there are also strategic projects in progress that also led to a temporary increase in expenses, from R$ 155 million to R$ 200 million, in the quarterly comparison of year on year.

Much of IMC’s debt is concentrated in debentures. The company has already summoned the debenture holders so that they can approve: the Panama transaction, a higher limit for the sale of assets without dependence on a new guarantee and, at the same time, prepayment of part of the commitments. The idea is to establish a percentage that will be reserved for creditors of what is obtained from the disposal of assets. Before selling the operation in Panama, the company had disposed of a small business in that country, the Carl’s Jr.

With a company that is less complex to manage, lighter, and with lower leverage, the idea is to set in motion faster growth in Brazil. Santoro, however, explains that new acquisitions are not on the radar. “We have a lot of work to do within our current flags.”

He points out that the Frango Assado chain, currently with 26 stores, has a potential that has already been mapped, which could lead it to triple in size. In addition, it sees room for expansion at Pizza Hut, which currently operates 250 units, and at KFC, which has 130 stores. “We have competitors with 800 to 1,000 stores”, he quotes, to give a parameter of the opportunities.

Source: Exam